14.

Long-term Debt and Borrowing Arrangements

Long-term debt and other borrowing arrangements consisted of:


	Maturity Date		As of December 31,
	Maturity Date		2012		2011
Floating Rate Term Loan ^(a)		April 2014	$	-	$	267
Floating Rate Senior Notes		May 2014		250		250
7⁵/₈% Senior Notes		May 2014		-		200
3¹/₂% Convertible Senior Notes		October 2014		128		345
7³/₄% Senior Notes		May 2016		-		375
Floating Rate Term Loan ^(a)		May 2016		49		20
4⁷/₈% Senior Notes		November 2017		300		-
9⁵/₈% Senior Notes		March 2018		446		445
Floating Rate Term Loan ^(a)		September 2018		-		412
8¹/₄% Senior Notes		January 2019		730		602
Floating Rate Term Loan ^(a)		March 2019		689		-
9³/₄% Senior Notes		March 2020		250		250

				2,842		3,166
Other				63		39

Total				2,905		3,205
Less: Short-term debt and current portion of long-term debt				57		37

Long-term debt			$	2,848	$	3,168

^(a)

The floating rate term loans are part of the Company’s senior credit facility, which includes its revolving credit facility maturing 2016, and is secured by pledges of all of the capital stock of all of the Company’s domestic subsidiaries and up to 66% of the capital stock of each direct foreign subsidiary, subject to certain exceptions, and liens on substantially all of the Company’s intellectual property and certain other real and personal property.

AVIS BUDGET GROUP, INC. CORPORATE DEBT

3¹/₂% Convertible Senior Notes

The Company’s 3¹/₂% Convertible Senior Notes due 2014 (the “Convertible Notes”) were issued in October 2009 at 100% of their face value for aggregate proceeds of $345 million. The Convertible Notes are general unsecured senior obligations of the Company. The Convertible Notes are not redeemable by the Company prior to maturity; however, they are convertible by the holders at any time prior to the second trading day before the maturity date of the Convertible Notes. The initial conversion rate for the Convertible Notes is 61.5385 shares of common stock per $1,000 principal amount, which is equal to an initial conversion price of approximately $16.25 per share. The Convertible Notes mature October 1, 2014.

Holders may require the Company to repurchase, for cash, all or part of the Convertible Notes upon a “fundamental change”, as defined under the indenture, at a price equal to 100% of the principal amount of the Convertible Notes being repurchased plus any accrued and unpaid interest. In addition, upon a “make-whole fundamental change”, prior to the maturity date of the Convertible Notes, the Company may, in some cases, increase the conversion rate for a holder that elects to convert its notes in connection with such make-whole fundamental change. Under these “make-whole” provisions, the Company could have been required to issue an additional 6.4 million shares to settle the Convertible Notes; as of December 31, 2012, the maximum number of additional shares that the Company could be required to issue under these “make-whole” provisions is 0.7 million shares. The Company initially designated 27.6 million shares (including the shares that could be issued under the “make-whole” provisions) which it can issue to settle its obligation upon conversion.

Concurrently with the issuance of the Convertible Notes, the Company purchased a convertible note hedge and entered into a warrant transaction, which effectively increased the conversion price of the Convertible Notes, from the Company’s perspective, to $22.50 per share. The convertible note hedge is intended to reduce the net number of shares required to be issued upon conversion of the Convertible Notes. The significant terms of the convertible note hedge and warrant transactions can be found in Note 17—Stockholders’ Equity.

During 2012, the Company repurchased $217 million of its Convertible Notes at a cost of $257 million. In conjunction with the repurchase of the Convertible Notes, the Company repurchased warrants and sold convertible note hedges corresponding to the repurchased Convertible Notes. See Note 17—Stockholder’s Equity for more details.

AVIS BUDGET CAR RENTAL CORPORATE DEBT

Floating Rate Term Loans

The Company’s floating rate term loan due 2014 was originally issued in April 2006 as part of the Company’s senior credit facility. In March 2010, the Company repaid $451 million of the loan and the terms were amended resulting in $52 million maturing in April 2012, which was subsequently repaid in October 2010, with the balance maturing in April 2014. In March 2012, the Company repaid the outstanding principal of $267 million.

The Company’s floating rate term loan due 2016 was issued in October 2011, for $20 million as part of the Company’s senior credit facility. During 2012, the Company borrowed an additional $30 million under this floating rate term loan. The floating rate term loan matures in May 2016 and bears interest at three-month LIBOR plus 300 basis points, for an aggregate rate of 3.32% at December 31, 2012. The Company used the proceeds from the loan to partially fund the acquisition of Avis Europe and to repay a portion of its floating rate term loan due 2018.

The Company’s floating rate term loan due 2018 was issued in October 2011 as part of the Company’s senior credit facility. During the 2012, the Company repaid the entire outstanding principal of the floating rate term loan due 2018.

The Company’s floating rate term loan due 2019 was issued in March 2012 as part of the Company’s senior credit facility. The $500 million loan matures in March 2019. The facility bears interest at the greater of three-month LIBOR or 1% plus 325 basis points, for an aggregate rate of 4.25% at December 31, 2012. Upon issuance of the loan, the Company paid to the lenders 1% of each lender’s commitments under the loan, which payment was structured as an original issue discount. During October 2012, the Company borrowed an additional $200 million under this floating rate term loan. Upon issuance of the addition to the loan, the Company paid to the new lenders 1% of each new lender’s commitments under the loan, which payment was structured as an original issue discount. The Company used the proceeds from the loan to repay approximately $420 million of term loan borrowings due in 2014 and 2018 and $75 million of its senior notes due in 2014.

Floating Rate Senior Notes

The Company’s Floating Rate Senior Notes were issued in April 2006 at 100% of their face value for aggregate proceeds of $250 million. The interest rate on these notes is equal to three-month LIBOR plus 250 basis points, for an aggregate rate of 2.81% at December 31, 2012. The floating rate notes pay interest quarterly on February 15, May 15, August 15 and November 15 of each year. The Company has the right to redeem these notes in whole or in part at any time at the applicable scheduled redemption price, plus in each case, accrued and unpaid interest through the redemption date.

7⁵/₈% and 7³/₄% Senior Notes

The Company’s 7⁵/₈% and 7³/₄% Senior Notes were issued in April 2006 at 100% of their face value for aggregate proceeds of $750 million. In 2010, the Company redeemed $175 million of its 7⁵/₈% Senior Notes due 2014 at 103.813% plus accrued and unpaid interest. During 2012, the Company repaid the entire outstanding balance of $200 million of its 7⁵/₈% Senior Notes due 2014 at 100% plus accrued and unpaid interest, and redeemed the entire outstanding balance of $375 million of its 7³/₄% Senior Notes due 2016 at 102.583% plus accrued and unpaid interest.

9⁵/₈% Senior Notes

The Company’s 9⁵/₈% Senior Notes were issued in March 2010 at 98.6% of their face value for aggregate proceeds of $444 million. The notes pay interest semi-annually on March 15 and September 15 of each year. The Company has the right to redeem these notes in whole or in part at any time on or after March 15, 2014, at the applicable redemption price, plus any accrued and unpaid interest through the redemption date.

8¹/₄% Senior Notes

The Company’s 8¹/₄% Senior Notes were issued through three separate issuances of $400 million, $200 million and $125 million, in October and November 2010 and March 2012, respectively, and form a single series of debt securities. The $400 million of notes were issued at 100% of their face value, the $200 million of notes were issued at 101% of their face value, and the $125 million were issued at 103.5% of their face value, for aggregate proceeds of $731 million. The notes pay interest semi-annually on January 15 and July 15 of each year. The Company has the right to redeem these notes in whole or in part at any time on or after October 15, 2014 at the applicable redemption price, plus any accrued and unpaid interest through the redemption date. In connection with the March 2012 issuance, the Company entered into a registration rights agreement, pursuant to which it completed in September 2012 an offer to exchange the notes for new notes with terms substantially identical to those of the originally issued notes, except that the transfer restrictions and registration rights provisions relating to the originally issued notes do not apply to the new notes.

9³/₄% Senior Notes

The Company’s 9³/₄% Senior Notes were issued in October 2011 at 100% of their face value for aggregate proceeds of $250 million. The notes pay interest semi-annually on March 15 and September 15 of each year. The Company has the right to redeem these notes in whole or in part at any time on or after September 15, 2015 at the applicable redemption price, plus any accrued and unpaid interest through the redemption date.

4⁷/₈% Senior Notes

The Company’s 4⁷/₈% Senior Notes were issued in November 2012 at 100% of their face value for aggregate proceeds of $300 million. The notes pay interest semi-annually on May 15 and November 15 of each year, beginning in May 2013. The Company has the right to redeem these notes in whole or in part at any time on or after May 15, 2015, at the applicable redemption price, plus any accrued and unpaid interest through the redemption date. The Company used the proceeds of these notes to repay a portion of the 7³/₄% Notes.

In connection with the sale of the notes, the Company entered into a registration rights agreement, under which it has agreed to use its reasonable best efforts to file an exchange offer registration statement related to the notes with the Securities and Exchange Commission and cause to become effective a registration statement with respect to a registered offer to exchange the notes for new notes, with substantially identical terms in a all material respects. In accordance with the registration rights agreement, the Company could be required to pay additional interest of up to 0.50% per annum on the principal amount of the notes from February 1, 2014 until the exchange offer is completed, a shelf registration statement, if required, is declared effective or the restricted notes become freely tradable under the Securities Act. The Company believes the likelihood of occurrence of such event is remote and, as such, the Company has not recorded a related liability as of December 31, 2012.

The Floating Rate Senior Notes, the 9⁵/₈% Senior Notes, the 8¹/₄% Senior Notes, the 9³/₄% Senior Notes and the 4⁷/₈% Senior Notes, in each case as described above, are senior unsecured obligations of the Company, ranking equally in right of payment with all of the Company’s existing and future senior indebtedness and are guaranteed on a senior basis by the Company and certain of its domestic subsidiaries.

CORPORATE GUARANTEE

In February 2007, the Company agreed to guarantee the payment of principal, premium, if any, and interest on the 7⁵/₈% Senior Notes, 7³/₄% Senior Notes and Floating Rate Senior Notes. The Company executed a Supplemental Indenture to provide the guarantee in accordance with the terms and limitations of such notes and the indenture governing the notes. In consideration for providing the guarantee, the Company received $14 million, before fees and expenses, from certain institutional investors. This consideration has been deferred and is being amortized over the life of the debt. As of December 31, 2012, the remaining deferred consideration to be recognized amounted to approximately $1 million.

DEBT MATURITIES

The following table provides contractual maturities of the Company’s corporate debt at December 31, 2012:


Year	Amount
2013	$	57
2014		395
2015		19
2016		45
2017		309
Thereafter		2,080

	$	2,905

COMMITTED CREDIT FACILITIES AND AVAILABLE FUNDING ARRANGEMENTS

At December 31, 2012, the committed credit facilities available to the Company and/or its subsidiaries at the corporate or Avis Budget Car Rental level were as follows:


	Total Capacity		Outstanding Borrowings		Letters of Credit Issued		Available Capacity
Revolving credit facility maturing 2016 ^(a) (b)	$	1,500	$	-	$	631	$	869
Other facilities ^(c)		10		4		-		6

^(a)

This revolving credit facility matures in May 2016 and bears interest of one month LIBOR plus 300 basis points.

^(b)

The senior credit facility, which encompasses the floating rate term loans and the revolving credit facility, is secured by pledges of all of the capital stock of all of the Company’s domestic subsidiaries and up to 66% of the capital stock of each foreign subsidiary directly owned by the Company’s domestic subsidiaries, subject to certain exceptions, and liens on substantially all of the Company’s intellectual property and certain other real and personal property.

^(c)

These facilities encompass bank overdraft lines of credit and finance leases, bearing interest of 3.22% to 5.77% as of December 31, 2012.

At December 31, 2012, the Company had various uncommitted credit facilities available, under which it had drawn approximately $38 million, which bear interest at rates of 0.42% to 5.97%.

In December 2012, the Company entered into a senior unsecured loan agreement in connection with the planned acquisition of Zipcar. The senior unsecured loan agreement provides for a commitment of up to $250 million and initially bears interest at the greater of LIBOR or 1%, plus 4.375%, subject to increases of 0.50% every three months after initial funding, subject to a cap. Any borrowings under this loan agreement would mature on the seven-year anniversary of the funding date.

DEBT COVENANTS

The agreements governing the Company’s indebtedness contain restrictive covenants, including restrictions on dividends paid to the Company by certain of its subsidiaries, the incurrence of additional indebtedness by the Company and certain of its subsidiaries, acquisitions, mergers, liquidations, and sale and leaseback transactions. The Company’s senior credit facility contains maximum leverage and minimum coverage ratio requirements. As of December 31, 2012, the Company was in compliance with the financial covenants of its senior credit facility.