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Rating Action:

Moody's places on review for upgrade Avis Budget rental car ABS Series 2018-2, 2019-2 and 2020-1

10 Jun 2021

New York, June 10, 2021 -- Moody's Investors Service, ("Moody's") has placed on review for possible upgrade the ratings on nine tranches of rental car asset-backed securities (ABS) issued by Avis Budget Rental Car Funding (AESOP) LLC (AESOP or the issuer). The issuer is an indirect subsidiary of the transaction sponsor and single lessee, Avis Budget Car Rental, LLC (ABCR, B2 negative). ABCR, a subsidiary of Avis Budget Group, Inc., is the owner and operator of Avis Rent A Car System, LLC (Avis), Budget Rent A Car System, Inc. (Budget), Zipcar, Inc. and Payless Car Rental, Inc. (Payless). AESOP is ABCR's rental car securitization platform in the U.S. The collateral backing the notes is a fleet of vehicles and a single lease of the fleet to ABCR for use in its rental car business.

Moody's actions on the rental car ABS are prompted by the expected increase in credit enhancement that the affected notes would have if the new Class D notes were to be issued by Avis Budget Rental Car Funding (AESOP) LLC Series 2018-2, 2019-2 and 2020-1 as expected on or around June 17, 2021.

COMPLETE RATING ACTIONS

Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2018-2

Series 2018-2 Fixed Rate Rental Car Asset Backed Notes, Class A, Aa1 (sf) Placed Under Review for Possible Upgrade; previously on Apr 28, 2021 Upgraded to Aa1 (sf)

Series 2018-2 Fixed Rate Rental Car Asset Backed Notes, Class B, Baa2 (sf) Placed Under Review for Possible Upgrade; previously on Jul 10, 2020 Downgraded to Baa2 (sf)

Series 2018-2 Fixed Rate Rental Car Asset Backed Notes, Class C, Ba1 (sf) Placed Under Review for Possible Upgrade; previously on Apr 28, 2021 Upgraded to Ba1 (sf)

Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2019-2

Series 2019-2 Rental Car Asset Backed Notes, Class A, Aa1 (sf) Placed Under Review for Possible Upgrade; previously on Apr 28, 2021 Upgraded to Aa1 (sf)

Series 2019-2 Rental Car Asset Backed Notes, Class B, Baa2 (sf) Placed Under Review for Possible Upgrade; previously on Jul 10, 2020 Downgraded to Baa2 (sf)

Series 2019-2 Rental Car Asset Backed Notes, Class C, Ba1 (sf) Placed Under Review for Possible Upgrade; previously on Apr 28, 2021 Upgraded to Ba1 (sf)

Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series 2020-1

Series 2020-1 Rental Car Asset Backed Notes, Class A, Aa1 (sf) Placed Under Review for Possible Upgrade; previously on Apr 28, 2021 Upgraded to Aa1 (sf)

Series 2020-1 Rental Car Asset Backed Notes, Class B, Baa2 (sf) Placed Under Review for Possible Upgrade; previously on Jul 10, 2020 Downgraded to Baa2 (sf)

Series 2020-1 Rental Car Asset Backed Notes, Class C, Ba1 (sf) Placed Under Review for Possible Upgrade; previously on Apr 28, 2021 Upgraded to Ba1 (sf)

RATINGS RATIONALE

Today's rating actions were prompted by the expected increase in credit enhancement that the affected notes would have if the new Class D notes were to be issued by Avis Budget Rental Car Funding (AESOP) LLC Series 2018-2, 2019-2 and 2020-1 as expected on or around June 17, 2021.

The required credit enhancement with respect to the new Class D notes will be calculated separately from the required credit enhancement for the Class A, the Class B and the Class C notes and will be determined as the sum of (1) 5% for vehicles subject to a guaranteed depreciation or repurchase program from eligible manufacturers (program vehicles) rated at least Baa3 by Moody's, (2) 8.5% for all other program vehicles, and (3) 12.6% for non-program (risk) vehicles.

Because the enhancement with respect to the Class D Notes is calculated based on the aggregate outstanding balance of Class A, B, C and D notes, any additional credit enhancement as a result of the Class D issuance requirements will also be to the benefit of the Class A, Class B and Class C notes. After the issuance of the Class D notes, we expect an increase in total credit enhancement including subordination for the Class A, B and C notes of Series 2018-2, 2019-2 and 2020-1, to range from about 4.9 to 5.7 percentage points for Class A, from 5.5 to 6.4 percentage points for Class B and 6.0 to 7.0 percentage points for Class C.

During the review period, Moody's will further assess the impact of the additional credit enhancement on a series by series basis based on a conclusive review of the final documentation related to the Class D note issuances and the final capital structure upon the Class D notes issuance transaction closing.

The coronavirus pandemic has had a significant impact on economic activity. Although global economies have shown a remarkable degree of resilience to date and are returning to growth, the uneven effects on individual businesses, sectors and regions will continue throughout 2021 and will endure as a challenge to the world's economies well beyond the end of the year. While persistent virus fears remain the main risk for a recovery in demand, the economy will recover faster if vaccines and further fiscal and monetary policy responses bring forward a normalization of activity. As a result, there is a heightened degree of uncertainty around our forecasts. Our analysis has considered the effect on the performance of corporate assets from a gradual and unbalanced recovery in US economic activity.

We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was "Moody's Global Approach to Rating Rental Fleet Securitizations" published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1232483. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of the ratings:

Up

Moody's could upgrade the ratings of the Series 2018-2, 2019-2 and 2020-1 Notes, as applicable if, among other things, (1) if the issuance of new Class D notes closes, resulting in greater credit enhancement available for the affected notes, as described earlier, (2) the credit quality of the lessee improves, (3) the likelihood of the transaction's sponsor defaulting on its lease payments were to decrease, and (4) assumptions of the credit quality of the pool of vehicles collateralizing the transaction were to strengthen, as reflected by a stronger mix of program and non-program vehicles and stronger credit quality of vehicle manufacturers.

Down

Moody's could downgrade the ratings of the Series 2018-2, 2019-2 and 2020-1 Notes if, among other things, (1) the credit quality of the lessee weakens, (2) the likelihood of the transaction's sponsor defaulting on its lease payments were to increase, (3) the likelihood of the sponsor accepting its lease payment obligation in its entirety in the event of a Chapter 11 were to decrease and (4) assumptions of the credit quality of the pool of vehicles collateralizing the transaction were to weaken, as reflected by a weaker mix of program and non-program vehicles and weaker credit quality of vehicle manufacturers.

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.

In rating this transaction, Moody's used a cash flow model to model cash flow stress scenarios to determine the extent to which investors would receive timely payments of interest and principal in the stress scenarios, given the transaction structure and collateral composition.

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

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 http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.

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.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK 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.

Joao Daher, CFA
Asst Vice President - Analyst
Structured 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

Karen Ramallo
Senior Vice President/Manager
Structured 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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