Several Budget Group rental car securitizations will likely enter into early amortization as a result of the company's Chapter 11 bankruptcy filing early last week.

According to a rating agency source, at least three deals are still outstanding: Budget's Team Fleet Financing Corp. 1999-4, TFFC 2001-2, and TFFC 2001-3. All three deals are senior/subordinate structures. Budget's commercial paper conduit was wound down in July.

Unlike wrapped transactions, the early amortization of these term deals is non-waivable, sources familiar with the situation said. The securitizations should begin paying down once the automatic stay period is lifted and the company can begin to sell vehicles. Budget has up to 60 days before the stay is lifted, but this is ultimately at the discretion of the bankruptcy court, which could extend the window.

"There's no question that the trusts will begin amortizing," said one bank researcher following the developments. "However, this is a restructuring, not a liquidation. In a situation like this, my opinion is that the trustee, in the interest of the bondholders, will avoid a fire sale' of the collateral, and would rather arrange for a more orderly unwinding of the fleet."

In rental car ABS, vehicles can be put back to the manufacturers during certain window periods or sold on the wholesale market. Also, if the company plans to continue as a going concern - either through a merger or independently - it is in the interest of the bondholder for the company to preserve the cash coming off the fleet for as long as possible, the analyst contended.

"To me, the best interpretation for the bondholder would be for Budget to continue working as a company, and, while providing services, retire the vehicles without disrupting the organization," the analyst said. The worst-case scenario would be for the cars to sit idly on the lot.

Budget's bankruptcy filing was not unexpected, as the company had indicated several times over the past few months that it could be forced to restructure under Chapter 11. In fact, equity researchers at Salomon Smith Barney believe that Budget's bankruptcy was a precondition for potential suitor Cendant Corp.

"We had previously stated that we believe Cendant would only purchase Budget out of bankruptcy, allowing Budget to refinance rental car debt and insulating Cendant from Budget liabilities," said Salomon.

Cendant, owner of Avis Holdings, would reportedly pay $100 million in cash and assume about $2.9 billion in vehicle fleet debt.

Budget stated that it has secured $750 million in vehicle financing from Deutsche Bank Securities, plus up to $100 million in debtor-in-possession financing. Over the last month, there has also been talk that Budget is considering a subsequent securitization as part of its restructuring. Budget missed an $18.25 million senior debt payment on April 1, as well as a $1.5 million interest payment on convertible subordinated notes on April 29.

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