Research Update: Avis Budget Outlook Revised To Negative On Weaker Financial Performance, 'BB' Rating Affirmed; Debt Ratings Lowered

Higher vehicle costs due to lower residual values strained Avis Budget's financial performance in 2024. Additionally, in the fourth quarter, the company announced it would accelerate its fleet rotation, which resulted in an impairment charge of $2.5 billion. The fleet refresh will likely enable better fleet cost visibility in the longer term, but we expect that credit metrics will be weak for the rating in 2025, with debt to capital of 105%-110% and EBIT interest coverage around 1.2x-1.4x. Therefore, we revised the rating outlook on Avis to negative from stable and affirmed the 'BB' rating. We also lowered our issue ratings on the company's secured debt to 'BB' from 'BB+' and on its unsecured debt to 'B+' from 'BB-'. We

...- Higher vehicle costs due to lower residual values strained Avis Budget's financial performance in 2024. Additionally, in the fourth quarter, the company announced it would accelerate its fleet rotation, which resulted in an impairment charge of $2.5 billion. - The fleet refresh will likely enable better fleet cost visibility in the longer term, but we expect that credit metrics will be weak for the rating in 2025, with debt to capital of 105%-110% and EBIT interest coverage around 1.2x-1.4x. - Therefore, we revised the rating outlook on Avis to negative from stable and affirmed the '##' rating. - We also lowered our issue ratings on the company's secured debt to '##' from '##+' and on its unsecured debt to 'B+' from '##-'. We revised down our recovery ratings on the secured debt to '3' (50%-70%) from '2' (70%-90%) and on the unsecured debt to '6' (0%-10%) from '5' (10%-30%). - The negative outlook reflects the likelihood of a downgrade over the next year if EBIT interest coverage remains...

Research Update