Debt Under Vehicle Programs and Borrowing Arrangements

12 Months Ended

Dec. 31, 2019

Debt Under Vehicle Programs and Borrowing Arrangements

Debt under Vehicle Programs and Borrowing Arrangements

Debt under vehicle programs, including related party debt due to Avis Budget Rental Car Funding (AESOP) LLC (“Avis Budget Rental Car Funding”), consisted of:



	As of December 31,
	2019			2018
Americas – Debt due to Avis Budget Rental Car Funding ^(a)	$	7,975		$	7,393
Americas – Debt borrowings ^(a)	827			635
International – Debt borrowings ^(a)	2,100			2,060
International – Finance leases	215			191
Other	—			2
Deferred financing fees ^(b)	(49		)	(49		)
Total	$	11,068		$	10,232

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^(a)	The increase reflects additional borrowings principally to fund increases in the Company's car rental fleet.


^(b)	Deferred financing fees related to Debt due to Avis Budget Rental Car Funding as of December 31, 2019 and 2018 were $40 million and $35 million, respectively.

Americas

Debt due to Avis Budget Rental Car Funding. Avis Budget Rental Car Funding, an unconsolidated bankruptcy remote qualifying special purpose limited liability company, issues privately placed notes to investors as well as to banks and bank-sponsored conduit entities. Avis Budget Rental Car Funding uses the proceeds from its note issuances to make loans to a wholly-owned subsidiary of the Company, AESOP Leasing LP (“AESOP Leasing”), on a continuing basis. AESOP Leasing is required to use the proceeds of such loans to acquire or finance the acquisition of vehicles used in the Company’s rental car operations. By issuing debt through the Avis Budget Rental Car Funding program, the Company pays a lower rate of interest than if it had issued debt directly to third parties. Avis Budget Rental Car Funding is not consolidated, as the Company is not the “primary beneficiary” of Avis Budget Rental Car Funding. The Company determined that it is not the primary beneficiary because the Company does not have the obligation to absorb the potential losses or receive the benefits of Avis Budget Rental Car Funding’s activities since the Company’s only significant source of variability in the earnings, losses or cash flows of Avis Budget Rental Car Funding is exposure to its own creditworthiness, due to its loan from Avis Budget Rental Car Funding. Because Avis Budget Rental Car Funding is not consolidated, AESOP Leasing’s loan obligations to Avis Budget Rental Car Funding are reflected as related party debt on the Company’s Consolidated Balance Sheets. The Company also has an asset within Assets under vehicle programs on its Consolidated Balance Sheets which represents securities issued to the Company by Avis Budget Rental Car Funding. AESOP Leasing is consolidated, as the Company is the “primary beneficiary” of AESOP Leasing; as a result, the vehicles purchased by AESOP Leasing remain on the Company’s Consolidated Balance Sheets. The Company determined it is the primary beneficiary of AESOP Leasing, as it has the ability to direct its activities, an obligation to absorb a majority of its expected losses and the right to receive the benefits of AESOP Leasing’s activities. AESOP Leasing’s vehicles and related assets, which as of December 31, 2019, approximate $10.2 billion and some of which are subject to manufacturer repurchase and guaranteed depreciation agreements, collateralize the debt issued by Avis Budget Rental Car Funding. The assets and liabilities of AESOP Leasing are presented on the Company’s Consolidated Balance Sheets within Assets under vehicle programs and Liabilities under vehicle programs, respectively. The assets of AESOP Leasing, included within assets under vehicle programs (excluding the investment in Avis Budget Rental Car Funding (AESOP) LLC—related party) are restricted. Such assets may be used only to repay the respective AESOP Leasing liabilities, included within Liabilities under vehicle programs, and to purchase new vehicles, although if certain collateral coverage requirements are met, AESOP Leasing may pay dividends from excess cash. The creditors of AESOP Leasing and Avis Budget Rental Car Funding have no recourse to the general credit of the Company. The Company periodically provides Avis Budget Rental Car Funding with non-contractually required support, in the form of equity and loans, to serve as additional collateral for the debt issued by Avis Budget Rental Car Funding.

The business activities of Avis Budget Rental Car Funding are limited primarily to issuing indebtedness and using the proceeds thereof to make loans to AESOP Leasing for the purpose of acquiring or financing the acquisition of vehicles to be leased to the Company’s rental car subsidiaries and pledging its assets to secure the indebtedness. Because Avis Budget Rental Car Funding is not consolidated by the Company, its results of operations and cash flows are not reflected within the Company’s financial statements.

During April 2018 and October 2018, Avis Budget Rental Car Funding issued approximately $400 million in asset-backed notes with an expected final payment date of September 2023 and approximately $550 million in asset-backed notes with an expected final payment date of March 2024, respectively. During February 2019, April 2019 and August 2019, Avis Budget Rental Car Funding issued approximately $600 million, $650 million and $650 million, respectively, in asset-backed notes with an expected final payment date of March 2022, September 2024 and March 2025, respectively. The Company used the proceeds from these borrowings to fund the repayment of maturing vehicle-backed debt and the acquisition of rental cars in the United States. Borrowings under the Avis Budget Rental Car Funding program primarily represent fixed rate notes and had a weighted average interest rate of 3.16% and 3.20% as of December 31, 2019 and 2018 respectively.

Debt borrowings. The Company finances the acquisition of vehicles used in its Canadian rental operations through a consolidated, bankruptcy remote special-purpose entity, which issues privately placed notes to investors and bank-sponsored conduits. The Company finances the acquisition of fleet for its truck rental operations in the United States through a combination of debt facilities and leases. These debt borrowings represent a mix of fixed and floating rate debt and had a weighted average interest rate of 2.87% and 3.33%

as of December 31, 2019 and 2018 respectively.

International

Debt borrowings. In 2013, the Company entered into a three-year, €500 million (approximately $687 million) European rental fleet securitization program, which is used to finance fleet purchases for certain of the Company’s European operations. Since 2013, the Company increased its capacity by €1.3 billion (approximately $1.5 billion), and extended the securitization maturity to 2021. The Company finances the acquisition of vehicles used in its International rental car operations through this and other consolidated, bankruptcy remote special-purpose entities, which issue privately placed notes to banks and bank-sponsored conduits. The International borrowings primarily represent floating rate notes and had a weighted average interest rate of 1.87% and 2.02% as of December 31, 2019 and 2018 respectively.

Finance leases. The Company obtained a portion of its International vehicles under finance lease arrangements. For the years ended December 31, 2019 and 2018, the weighted average interest rate on these borrowings was 1.25% and 1.17% respectively. All finance leases are on a fixed repayment basis and interest rates are fixed at the contract date.

Debt Maturities

The following table provides the contractual maturities of the Company’s debt under vehicle programs, including related party debt due to Avis Budget Rental Car Funding, at December 31, 2019:



	Debt under Vehicle Programs ^(a)
2020	$	1,753
2021 ^(b)	3,225
2022 ^(c)	3,032
2023	1,097
2024	1,471
Thereafter	539
	$	11,117

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^(a)	Vehicle-backed debt primarily represents asset-backed securities.


^(b)	Includes $1.9 billion of bank and bank-sponsored facilities.


^(b)	Includes $1.7 billion of bank and bank-sponsored facilities.

Committed Credit Facilities And Available Funding Arrangements

The following table presents available funding under the Company’s debt arrangements related to its vehicle programs, including related party debt due to Avis Budget Rental Car Funding, at December 31, 2019:



	Total Capacity ^(a)		Outstanding Borrowings ^(b)		Available Capacity
Americas – Debt due to Avis Budget Rental Car Funding	$	9,761	$	7,975	$	1,786
Americas – Debt borrowings	1,009		827		182
International – Debt borrowings	3,003		2,100		903
International – Finance leases	237		215		22
Total	$	14,010	$	11,117	$	2,893

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^(a)	Capacity is subject to maintaining sufficient assets to collateralize debt.


^(b)	The outstanding debt is collateralized by vehicles and related assets of $9.3 billion for Americas - Debt due to Avis Budget Rental Car Funding; $1.0 billion for Americas - Debt borrowings; $2.6 billion for International - Debt borrowings; and $0.2 billion for International - Finance leases.

Debt Covenants

The agreements under the Company’s vehicle-backed funding programs contain restrictive covenants, including restrictions on dividends paid to the Company by certain of its subsidiaries and restrictions on indebtedness, mergers, liens, liquidations and sale and leaseback transactions, and in some cases also

require compliance with certain financial requirements. As of December 31, 2019, the Company is not aware of any instances of non-compliance with any of the financial or restrictive covenants contained in the debt agreements under its vehicle-backed funding programs.