Research Update: Cendant Corp.

On April 23, 2004, Standard&Poor's Ratings Services revised its outlook for Cendant Corp. to positive from negative, and its outlook for Cendant's wholly owned subsidiary, PHH Corp. to stable from negative. At the same time, all related ratings, including the 'BBB' corporate credit rating on Cendant and the 'BBB+' counterparty credit rating on PHH, were affirmed (see list below). Please refer to the PHH Corp. summary analysis published concurrently by Standard&Poor's for additional information regarding this entity. New York, N.Y.-based Cendant had $5.65 billion of corporate debt outstanding as of March 31, 2004. Corporate debt includes Upper Decs, but excludes debt under management and mortgage programs. The outlook revision reflects good operating momentum at the company

...a 12% increase in average price. Vehicle services also reported very good results as Avis benefited from a 2% increase in car rental day volume and a 5% increase in price. These trends support solid EBITDA growth for 2004. Cendant repaid about $800 million in debt in 2003, and an additional $2 billion in debt is expected to be eliminated in 2004 (includes Upper Decs). The company's 2004 share repurchases and dividends are expected to be managed at levels that allow Cendant to meet its debt reduction targets. Credit measures are expected to continue to improve as debt is reduced, and as the travel environment gradually rebounds. Standard & Poor's expects that leverage, as measured by total debt to EBITDA, will improve to the low-2x area in 2004, from 3.1x at Dec. 31, 2003. EBITDA coverage of interest expense is expected to grow to the 6x area from about 5x in 2003. Credit measures exclude EBITDA and debt of PHH, are adjusted for operating leases, and include 10% of car rental securitizations...

Research Update