Avis Budget Group is preparing to sponsor two series of securitizations secured by car rental revenue through the Avis Budget Rental Can Funding platform, raising a total of $500 million.
The master trust, the Avis Budget Rental Car Funding will issue both deals, the series 2023-3 and 2023-4, that will then issue three classes of notes—A, B and C, according to Fitch Ratings and Moody's Investors Service, which will assign ratings to the notes. The leases are on a revolving pool of program and non-program vehicles from various original equipment manufacturers, according to Fitch.
The master trust is known as AESOP, and similar to the previous transactions the leases finance a highly diversified car fleet of cars and light trucks. By just about every measure, such as original manufacturer, model, segment, and geographical location, the pool is diversified. The deal also has a diverse source of sublessees, including Avis Rent a Car System, Budget Rent a Car, Zipcar and Payless Car Rental.
A vast majority of the fleet mix (98.5%) is comprised of non-program manufacturers, including BMW, Chrysler, Ford, Honda and Toyota, while program manufacturers account for the rest, according to Fitch. Toyota, for one, accounts for 19.88% of the fleet, has an 'A+' rating from Fitch (the highest) and a stable rating outlook. Other carmakers that round out the top five are Ford (14.27%), Chrysler (19.96%), General Motors (15.64%), and Kia (7.18%), all of which have stable or positive rating outlooks, according to Fitch.
Fitch noted that AESOP has a number of structural features that strengthen the deal. One of those is original equipment manufacturer (OEM) concentration limits, the inclusion of medium- and heavy-duty trucks, and a different minimum depreciation rate of non-program vehicles (NPVs) to account for market value and an increase to the vehicle age limit.
Citigroup Global Markets, BNP Paribas Securities, BofA Securities, Credit Agricole Securities and Morgan Stanley & Co., are the structuring lead on the deals, according to Fitch Ratings and Moody's. The rating agencies point to subordination, overcollateralization and liquidity provide credit enhancement to the deal, the rating agencies said.
As for ratings, each rating agency expects to rate them identically. For its part, Fitch expects to assign 'AAA' to the $196.2 million, class A noted; 'A' to the $30 million notes and 'BBB-' to the $23.7 million, class C notes. Moody's plans to assign ratings of 'Aaa' to the class A notes; 'A2' to the class B notes and 'Baa3' to the class C notes.
