Avis Budget Rental Car Funding (AESOP) will bring to market two deals of revolving pools of manufacturer vehicle leases extended to its parent company, Avis Budget Car Rental, which subleases them to rental and car share subsidiaries.
According to a report from Fitch Ratings, the deals, Series 2023-5 and 2023-6, will each issue $250 million. They are the 18th and 19th such deals that Fitch has rated since 2017. The upcoming deals are very similar to the two most recent ones, although the average age of the rental fleet is a bit shorter, at 12.1 months, versus 12.8 months for Series 2023-3 and Series 2023-4.
Avis Budget Group is the sponsor, and J.P. Morgan Securities is on the deal as underwriter. A letter of credit from JP Morgan Chase will provide credit enhancement, according to the Fitch report.
The deals benefit from a fleet that is diverse in terms of manufacturers, models, segments, and geography, Fitch says. The manufacturers with the biggest share of the portfolio include Chrysler, GM, Toyota, and Ford. While Fitch does not publicly rate Avis Budget Car Rental, it is "deemed an adequate servicer and administrator," the report says.
However, some concentration limits, including those for Tesla, have been relaxed, the rating agency says. Depreciation has fallen for non-program vehicles like the ones in this deal, Fitch notes, and a strong secondary market for cars and trucks supports their values. Sublessees include Avis, Budget, and Zipcar, among others.
Fitch does sound a note of caution about the industry, calling the outlook for prime rental fleet ABS "deteriorating" in 2023 compared to 2022. It also expects a mild recession in the second half of the year, which could dampen job growth and vehicle rental demand from both consumers and businesses. Another risk for consumers: still-high inflation may erode their buying power.
With all that in mind, Fitch expects to rate the class A notes from both deals 'AAA'; the class B notes from both deals 'A', and the class C notes from both deals 'BBB'. The Series 2023-5 deal has a final maturity of April 2028, while for Series 2023-6, final maturity is December 2029.
