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Rating Action:

Moody's raised Dollar Thrifty rating to B1.

11 May 2012

New York, May 11, 2012 -- Moody's Investors Service raised the Corporate Family and Probability of Default Ratings (CFR and PDR) of Dollar Thrifty Automotive Group, Inc. (Dollar) to B1 from B2. The upgrade reflects Moody's expectation that the company will be able to sustain credit metrics that are solidly supportive of the B1 rating level as a result of its strong position in the value segment of the daily car rental market, favorable industry fundamentals, and a prudent financial strategy. The rating also anticipates that the company will maintain an adequate liquidity profile.

RATINGS RATIONALE

Notwithstanding these positive factors, the B1 rating also recognizes that Dollar could pursue share repurchases or other shareholder-friendly actions that could increase leverage or narrow the current liquidity position. However, Dollar has a very efficient operating structure and competitive returns. In addition, its capital structure, unlike that of other peers, includes only fleet debt and has no burdensome corporate debt. As a result, its credit metrics are very strong for the B1 rating level. Although, shareholder friendly actions would weaken these measures from their currently robust levels, we expect that they would be measured and would enable Dollar to maintain credit metrics that are consistent with the B1 rating.

The Speculative Grade Liquidity rating is SGL-3 and the rating outlook is stable.

The stable outlook reflects the company's highly competitive position in the daily car rental market and strong credit metrics balanced against the potential for measured shareholder-friendly actions that might be undertaken.

Dollar's liquidity position is supported by a $450 million secured credit facility that matures during 2017. After letter of credit usage, availability under the facility is about $300 million. Dollar's cash position approximates $500 million. In addition, the company has capacity of $420 million under its VFN facility with a revolving usage period extending to October 2013. These liquidity sources, amounting to approximately $1.2 billion provide adequate coverage for the company's fleet purchase requirements and the approximately $500 million in debt maturing during the coming twelve months.

Important industry fundamentals that support the B1 rating are the discipline fleet management strategies being employed by the major car rental companies and the strong used car market. Although pricing within the sector will remain competitive, the resistance to over fleeting by the rental companies and the healthy used car market should support adequate return measures.

Dollar's rating would be considered for further positive action only after there is greater clarity with respect to the company's long-term financial strategy, particularly relating to dividend and share repurchase levels, and the level of corporate debt the company might carry. Credit metric levels that could support positive movement in the rating include EBIT/Interest approximating 2.25x, debt/EBITDA in the area of 2.75x, and retained cash flow to debt of 25%. Any upward movement in the rating would also be contingent upon the preservation of a sound liquidity position.

The most likely source of stress on the rating would come from an aggressive dividend or share repurchase strategy. Metric levels that might indicate pressure on the rating include EBIT/Interest approximating 1.25x and debt/EBITDA in the area of 4x.

The Hertz Corporation (CFR B1 under review for possible downgrade) may proceed with an attempt to acquire Dollar. We do not anticipate that an acquisition by Hertz would result in any erosion in the risk posed to Dollar's current debt-holders due to change of control provisions. Nevertheless, if Hertz resubmits an offer for Dollar, the company's rating would be reassessed based on the terms of the proposal.

The Hertz Corporation (CFR B1 under review for possible downgrade) had made a prior unsuccessful offer to acquire Dollar, and could proceed to make a future bid for the company. Moody's notes that Dollar's bank credit facility contains a change of control provision that would likely result in a termination of the facility and require repayment of any outstandings in the event that Hertz were to acquire the company. Consequently, while we do not anticipate that an acquisition by Hertz would pose any additional risk to the facility, Dollar's rating would be reassessed based on the terms of any new offer.

The principal methodology used in rating Dollar Thrifty Automotive Group was the Global Equipment and Automotive Rental Industry Methodology published in December 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, 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 has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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 relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant 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.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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.

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

Michael J. Mulvaney
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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

Moody's raised Dollar Thrifty rating to B1.
No Related Data.
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