Analysts said early Tuesday that Avis Budget Group Inc. is still compliant with its debt agreements, after the car rental company said it has temporarily extended a bank conduit facility as travel volumes continue to deteriorate, reported the Associated Press.
In its third quarter earnings report, Avis Budget Group reported a pretax loss of $1 billion to $1.2 billion and reported that the company shed 700 jobs from its 30,000-member work force.
Full press release below.
Avis Budget Group Comments on Preliminary Third Quarter Results and Extends Asset-Backed Conduit Financing
Avis Budget Group, Inc. (CAR 1.30, -0.10, -7.1%), a leading provider of vehicle rental services, today announced preliminary results for its third quarter, which ended September 30, 2008.
Revenues are expected to total $1.7 billion in the quarter; EBITDA is expected to be approximately $141 million, excluding unusual items, compared to $171 million in third quarter 2007; and pretax income, also excluding unusual items, is expected to be approximately $87 million.
Unusual items in third quarter 2008 are expected to be comprised primarily of an impairment of goodwill and other intangible assets of $1.1 - 1.3 billion and restructuring charges and other items of $11 million. As a result, the Company expects a pretax loss of $1.0 - 1.2 billion including unusual items.
In the third quarter the Company implemented a workforce reduction totaling more than 700 employee positions. These staffing reductions and other actions, which gave rise to the restructuring charges recorded in the third quarter, are expected to save the Company more than $50 million annually.
The Company also announced that it has extended $1.35 billion of its principal $1.5 billion asset-backed bank conduit facility to finance cars in its rental fleet for sixty days while it continues to work with lenders on a further renewal. The cost of borrowings under the facility, which now matures in late December 2008, is expected to be nearly three percentage points higher than in the past due to the recent turmoil in the credit markets. In addition, the facility is expected to carry a double-A rating, up from the previous single-A. In conjunction with the extension of this facility, we amended our $1.1 billion seasonal conduit facility, which matures in February 2009, to contain similar pricing and other terms. We have also transferred $100 million of commitments from the seasonal conduit facility to the principal conduit facility.
"Declining travel volumes made the third quarter a more challenging operating environment than expected," said Ronald L. Nelson, Avis Budget Group Chairman and Chief Executive Officer. "Among difficult macroeconomic and credit market conditions, we have adjusted our fleet levels, continued to achieve solid results in our sales of used vehicles, taken steps like the extension of our conduit facility to bolster our liquidity, and moved aggressively to reduce costs throughout our business."
The Company said that, based on its preliminary results, it remained in compliance with the financial covenants contained in its principal borrowing agreements as of September 30.
In addition, the Company projects that its full-year 2008 revenue, EBITDA and pretax income, excluding unusual items, will be significantly lower than our previous estimates primarily due to lower vehicle rental revenues than expected. The Company expects to announce its third quarter results and discuss its revised outlook during the week of November 3.
SOURCE Avis Budget Group, Inc.