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Rating Action:

Moody's downgrades Avis ratings, including CFR to B2 from Ba3; ratings under review for downgrade

24 Apr 2020

New York, April 24, 2020 -- Moody's Investors Service, ("Moody's") downgraded the ratings of Avis Budget Car Rental, LLC and its guaranteed subsidiaries including: Avis Budget Car Rental, LLC (Avis) -- Corporate Family Rating (CFR) to B2 from Ba3; Probability of Default Rating (PDR) to B2-PD from Ba3-PD; secured bank facility to Ba2 from Baa3; senior unsecured notes to B3 from B1; and, Avis Budget Finance PLC -- senior unsecured to B3 from B1. The Speculative Grade Liquidity rating is lowered to SGL-4 from SGL-3. The ratings remain under review for downgrade.

Downgrades:

..Issuer: Avis Budget Car Rental, LLC

.... Corporate Family Rating, Downgraded to B2 from Ba3; Remains Under Review for further Downgrade

.... Probability of Default Rating, Downgraded to B2-PD from Ba3-PD; Remains Under Review for further Downgrade

.... Speculative Grade Liquidity Rating, Downgraded to SGL-4 from SGL-3

....Senior Secured Bank Credit Facility, Downgraded to Ba2 (LGD2) from Baa3 (LGD2); Remains Under Review for further Downgrade

....Senior Unsecured Regular Bond/Debenture, Downgraded to B3 (LGD5) from B1 (LGD5); Remains Under Review for further Downgrade

..Issuer: Avis Budget Finance PLC

....Senior Unsecured Regular Bond/Debenture, Downgraded to B3 (LGD5) from B1 (LGD5); Remains Under Review for further Downgrade

RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Avis' ratings, including the B2 CFR, reflect the considerable weakening of the company's liquidity position that will occur due to the coronavirus' impact on air-travel, car rental usage rates, and the used car market. Avis business is built around renting its cars, on-airport and off-airport, and being able to efficiently dispose of the rental fleet. Air travel, which has a very strong relationship to rental car utilization rates, has fallen by over 90% and we expect travel to remain weak through 2020. At the same time the market for used cars, which is quite large and usually quite stable, has contracted at an unprecedented pace and Moody's believes realized prices are down by a record 10%.

As a result of this stress, Avis' revenues and earnings will declined precipitously, and the company's earnings and cash flow will become significantly negative during the second quarter.

Demand and pricing in the 40 million-unit US used car market should begin to recover sometime during the third quarter which should ease some stress on liquidity. Moody's believes that Avis has adequate liquidity to fund the cash outflow that will occur until the used car market becomes more accessible during the third quarter. At March 31, this liquidity position, including cash and availability under credit facilities, approximated $1.4 billion.

The review is focusing on Avis' ability to maintain adequate liquidity until the used car market reopens to operate efficiently, and thereby accommodate a defleeting of the company's vehicle portfolio.

Avis' ratings could be downgraded if: 1) the pace of cash consumption commencing during the second quarter materially exceeds our expectations; 2) the used car market remains depressed through the third quarter; or, 3) the company's liquidity sources are on a trajectory to fall below expected requirements.

The car rental sector has been one of the sectors most significantly affected by the credit shock given its heavy dependence on air travel and on the sale of used vehicles. Business activity in both of these markets, which are critical to Avis's ongoing operations, have fallen precipitously, thereby resulting in a large monthly operating cash burn and a severe near-term liquidity shortfall. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial credit implications of public health and safety. Avis has minimal environmental risk associated with the ownership and operation of its vehicle fleet. The company also maintains adequate relationships with its employees, regulatory bodies and the communities in which it operates.

Avis Budget Group, Inc. is one of the world's leading car rental companies through its Avis and Budget brands. The company's Zipcar brand, is the world's leading car sharing network. The company's 2019 revenues were $9.2 billion.

The principal methodology used in these ratings was Equipment and Transportation Rental Industry published in April 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1061773. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Bruce Clark
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Robert Jankowitz
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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