Dollar Thrifty Automotive Group Inc. announced Feb. 4 that it has obtained approval from the rating agencies and the monoline insurers of its medium-term note (MTN) programs to eliminate the requirement that the company maintain a specific percentage of the value of its vehicle inventory under manufacturer guaranteed repurchase or depreciation (GDP) programs. Under the previous terms of the MTN programs, the company was not permitted to have more than 75 percent of the net book value of its vehicle inventory comprised of non-program, or risk, vehicles. The company will now be able to maintain a fleet comprised of 100 percent risk vehicles, while retaining the ability to purchase GDP vehicles at its discretion to meet seasonal demand and allow flexibility in its de-fleeting cycle.
With this amendment, the company obtains maximum flexibility in purchasing vehicles. “We will be able to make fleet purchase decisions based on the most favorable purchase economics available in a rapidly changing market place, rather than a predetermined mix of GDP and risk vehicles. Additionally, this amendment allows us the flexibility to reduce our credit exposure to the residual value guarantees provided by the vehicle manufacturers during an uncertain time in our economy," said Scott Thompson, president and chief executive officer.
The company also amended its credit facility. The company permanently reduced the maximum outstanding enhancement letters of credit with respect to its commercial paper and MTN programs by $50 million to $148 million, and made a corresponding reduction in its revolving credit facility that permanently reduced the total revolving loan and letter of credit commitment to $290 million.
"The reduction in the revolving loan and letter of credit commitments is part of the overall process of right-sizing our business to adapt to the current economic climate. We have already taken the necessary steps to reduce our overhead costs and vehicle fleet levels to meet expected demand in 2009. This capacity reduction will further reduce the interest costs associated with maintaining unused capacity for enhancement letters of credit that exceeded the level required to support our expected fleet financing structures. These amendments are a win-win for the lenders and the company, and we believe demonstrate our ability to work together on business issues of this nature," said Thompson.