With the purchase of fleet leasing giant PHH Vehicle Management Services Corp. from Cendant Corp., Avis Rent a Car Inc. is seen as becoming a more active player in the ABS marketplace.

In acquiring the fleet operations from Cendant, Avis also picked up approximately $3.2 billion in debt, much of which had been financed in the medium-term note market through one-year and 18-month fixed and floating-rate debt.

Sources in the financial community said that Avis plans to employ a variety of financial vehicles to fund PHH going forward, including securitized term facilities, in addition to the securitized commercial paper programs which Avis has favored for its own vehicle rental business.

However, the sources agree that there are some crucial differences in the nature of the assets held in its rental operations and those acquired in the fleet business, with the latter more closely resembling the standard auto lease agreements.

Avis' Chief Financial Officer Kevin M. Sheehan said that PHH's financing "will be fashioned in many ways similar to the Avis model."

Avis issues most of its debt under Aesop Funding Corp.'s $2 billion structured prime-1-rated commercial paper program. David Andrews, an analyst at Moody's Investors Service, said that one key element of the rating process for the Avis debt is the fact it purchases its vehicles under special buy-back arrangements with the manufacturers, primarily General Motors.

The PHH business is somewhat different, since it serves as an outsourcing venue for the automotive needs of major U.S. corporations. PHH each year purchases about 140,000 new vehicles and sells 140,000 used vehicles. Its total automotive fleet is over 700,000 vehicles.

PHH was last in the marketplace for debt in March,when it sold $100 million of one-year floating rate notes through Merrill Lynch at 23 basis points over the three-month LIBOR. The issue has a six-month call and may be redeemed on Sept. 23. - David Feldheim

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