Fitch Places Avis on Rating Watch Evolving Following Dollar Thrifty Offer

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has placed the ratings of Avis Budget Group (ABG) on Rating Watch Evolving following ABG's counter offer to acquire Dollar Thrifty Automotive Group, Inc. (DTG) in a $1.3 billion cash-and-stock transaction. Approximately $2.1 billion of ABG debt is affected by this action.

The Rating Watch Evolving placement reflects Fitch's view that the proposed transaction has a range of potential outcomes. At the proposed price and terms, Fitch views the acquisition positively and believes that the acquisition will complement ABG's value-oriented Budget brand and strengthen its market position in the U.S. rental car industry. This could result in positive rating momentum if the merger closes under the proposed terms and ABG is able to demonstrate relatively soon after the merger that integration is proceeding well and that pro forma leverage targets are achievable. ABG's leverage, as measured by corporate debt to corporate EBITDA, was 7.5 times (x), calculated on trailing 12 months on 1Q'10.

Downward rating potential is created by the possibility of a bidding war, if ABG were to substantially increase the debt needed to close the transaction. Fitch notes that Hertz Corporation (Hertz) has the right to increase its existing bid to match or surpass ABG's counter offer should DTG's board accept the proposed terms.

Fitch also recognizes that the acquisition requires regulatory approvals and adds near-term integration and execution risks.

If ABG is not successful in acquiring DTG, Fitch believes that an affirmation of current ratings is the most likely outcome. Fitch's assignment of a Rating Outlook at that point will consider trends in the rental car industry as well as an assessment of ABG's funding flexibility, liquidity, and operating metrics.

Regardless of which company ends up acquiring DTG, Fitch believes the transaction will remove a sizeable player in the rental car industry and could benefit industry dynamics.

Fitch has placed the following ratings on Rating Watch Evolving:

Avis Budget Car Rental, LLC

--Long-term Issuer Default Rating (IDR) 'B+';

--Senior secured debt 'BB-/RR3';

--Senior unsecured debt 'B-/RR6'.

Avis Budget Group, Inc.

--Long-term IDR 'B+'.

Based in Parsippany, NJ, ABG is one of the largest general use rental car companies in the world. ABG consists of two of the most recognized brands in the rental car industry: Avis and Budget. Avis is a leading supplier to the premium travel segment and Budget is considered a top brand in the value segment.

Fitch's rating actions today reflect the application of its 'Master Global Financial Institutions Criteria' dated Dec. 29, 2009 and 'Finance and Leasing Companies Criteria' dated Dec. 30, 2009, available on the Fitch website at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

Related Research:

Finance and Leasing Companies Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493344

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.