Avis Budget Car Rental, which weathered the severe COVID-19 impact on the rental-car industry, is seeking to price its first fleet securitization
The $527.5 million Avis Budget Rental Car Funding LLC, Series 2021-1 issuance plans arrived just after Avis reported its
The stronger performance coincides with normalizing fleet levels after the company (along with rivals Enterprise and Hertz) last year sold off vehicles as the coronavirus pandemic forced the rental-car industry to downsize operations in the wake of air-travel restrictions that hindered the companies’ core airport rental sites.
Avis “has displayed effective fleet management during the coronavirus-driven credit shock, and the Americas utilization rate has recovered to 68.0% in Q1 2021 from a low of 33.0% in Q2 2020,” according to a presale report from Moody’s Investor’s Service.
The capital stack in the Series 2021-1 notes includes a $365 million Class A tranche with preliminary triple-A ratings from Fitch Ratings and Moody’s Investors Service. The Series 2021-1 Class A notes carry credit enhancement of 30.48%,
In Avis’ first ABS deal following the COVID-19 outbreak, the company issued notes that were initially issued with lower double-A ratings – which at the time matched the downgraded ratings for about $6.3 billion in outstanding Avis ABS bonds. Those issues since 2016 remain at Aa1 (the equivalent of double-A) with Moody’s, but Fitch last week affirmed the AAA ratings it holds on outstanding Avis ABS bonds, and revised their outlook to stable.
Avis is also marketing a $45 million Class B tranche with a single-A rating; a $30 million Class C offering with a BBB rating; and an unrated $60 million Class D tranche – a subordinate tranche that has not been part of previous Avis master-trust securitizations.
Also new to the deal is a scheduled minimum depreciation rate stepdown for higher aged fleet vehicles, according to the ratings agency reports.
All the notes are issued by an indirect special purpose vehicle (SPV) of Avis Budget Car Rental – Avis Budget Rental Car Funding LLC (AESOP) – which serves as a master trust leasing the vehicles from two special-purpose vehicles.
Under typical arrangements for rental auto-fleet ABS deals, the notes will be paid from the lease proceeds from Avis to the SPVs, as well as proceeds from the resale of the vehicles at a later date. While fleets are crucial business elements for a rental car firm and Avis would be expected to affirm its lease obligations to the SPVs in the event of a bankruptcy.
