Avis Raises $400M In Private Placement 144A Notes

New Issue-Avis sells $400 mln in senior notes

Avis Budget Car Rental has raised $400 million in a sale of senior notes in the 144a private placement market, Reuters reports. The proceeds of the sale will be used to help finance its planned purchase of rival Dollar Thrifty Automotive Group, adds Bloomberg.

The car rental company has appointed Citi, Morgan Stanley, Credit Agricole and RBS as the joint bookrunning managers for the sale. The notes carry a coupon rate of 8.25%, and are due to mature Jan. 15, 2019.

Avis Budget Car Rental LLC/Avis Budget
Finance (CAR.N) on Thursday sold $400 million of senior notes
in the 144a private placement market, said IFR, a Thomson
Reuters service.

Citi, Morgan Stanley, Credit Agricole and RBS were the
joint bookrunning managers for the sale.
BORROWER: AVIS BUDGET CAR RENTAL LLC/AVIS BUDGET FINANCE
AMT $400 MLN COUPON 8.25 PCT MATURITY 1/15/2019
TYPE SR NTS ISS PRICE 100.00 FIRST PAY 1/15/2011
MOODY’S B3 YIELD 8.25 PCT SETTLEMENT 10/15/2010
S&P SINGLE-B SPREAD 587 BPS PAY FREQ SEMI-ANNUAL
FITCH N/A MORE THAN TREAS NON-CALLABLE 4 YRS*

Avis Budget Group Inc., the third- largest U.S. rental-car company, plans to sell $400 million of debt to help pay for its acquisition of Dollar Thrifty Automotive Group Inc., according to a person familiar with the transaction.

The notes due in 2019 may be issued as soon as today at a yield of 8.25 percent to 8.375 percent, said the person, who declined to be identified because terms aren’t set. Parsippany, New Jersey-based Avis may also use proceeds to repay outstanding debt, the person said.

Avis is marketing the notes a week after Dollar Thrifty shareholders rejected another takeover bid from Hertz Global Holdings Inc., the second-largest car rental company. Sales of junk-rated corporate debt to pay for acquisitions has climbed this year to 15 percent of issuance from 5 percent in 2009, according to a JPMorgan Chase & Co. report on Oct. 1.

“Dollar comes with income and hardly any debt, so the picture for Avis looks better now,” said Shelly Lombard, a debt analyst with New York-based Gimme Credit. “Not as good as it would’ve looked with Hertz, and not as good as it would’ve been at a lower price, but it looks better nonetheless.”

Hertz withdrew its $1.44 billion bid to acquire Dollar Thrifty on Sept. 30 after the shareholder vote. Avis increased its offer to $1.53 billion a week earlier.

Variable Funding Notes

The securities are expected to be rated B3 by Moody’s Investors Service and B, one step higher, by Standard & Poor’s. High-yield, high-risk, or junk, debt is ranked below Baa3 by Moody’s and lower than BBB- by S&P.

Avis may issue the notes through the company’s Avis Budget Car Rental LLC and Avis Budget Finance Inc. units, the person said. Citigroup Inc., Morgan Stanley, Credit Agricole and RBS Securities Inc. are managing the sale.

Dollar Thrifty’s debt included $1.1 billion of asset-backed notes, $200 million of variable funding notes and $153.1 million of term-loan borrowings as of June 30, according to a filing with the Securities and Exchange Commission.

Avis reported preliminary third-quarter revenue that trailed analysts’ estimates earlier today as drivers used their borrowed cars less. Revenue in the period was $1.5 billion, the company said today in a statement. Sales a year earlier were $1.47 billion, and the average of three analysts’ estimates compiled by Bloomberg was $1.52 billion.

Closely held Enterprise Holdings Inc., based in St. Louis, is the biggest U.S. rental-car company.

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