Dollar Rent A Car 2011 Annual Report Download - page 22

Enhancement levels are determined by rating agencies and are dependent on a number of factors, including the fleet mix of Program versus Non-Program
Vehicles as well as the credit ratings of vehicle manufacturers and the Company. There can be no assurance that collateral enhancement requirements on
future asset-backed financings will not increase significantly.
The Company’s strategy is to maintain a predominately risk fleet, with risk vehicles comprising approximately 96% of our vehicle inventory as of
December 31, 2011. If residual values of our risk vehicles decline significantly or we experience cumulative losses on the disposition of risk vehicles
exceeding a specified percentage of the aggregate value of our fleet, we could be required to increase the monthly depreciation payments under our asset-backed
medium-term notes during the remaining life of the vehicles, increase the level of collateral enhancement, or both. Such payments or increase in collateral
enhancement would reduce our liquidity available for other purposes.
Restrictions and Restrictive Covenants
Certain of our vehicle financing and credit facilities contain covenants that, among other things, limits or restricts our and our subsidiaries’ ability
to:
· dispose of assets;
· incur additional indebtedness;
· incur guarantee obligations;
· prepay other indebtedness;
· pay dividends or make share repurchases;
· create liens on assets;
· enter into sale and leaseback transactions;
· make investments, loans, advances or capital expenditures;
· make acquisitions;
· engage in mergers or consolidations;
· change the business conducted by us; and
· engage in certain transactions with affiliates.
On February 16, 2012, the Company terminated its existing Senior Secured Credit Facilities (hereinafter defined) and replaced it with a new $450
million revolving credit facility (the “New Revolving Credit Facility”) that expires in February 2017. Under the New Revolving Credit Facility, we are subject
to a maximum corporate leverage ratio of 3.0 to 1.0, a minimum corporate interest coverage ratio of 2.0 to 1.0, and a minimum corporate EBITDA requirement
of $75 million. In connection with the entry into the New Revolving Credit Facility, the financial covenants previously applicable under our Series 2010-3
variable funding notes and our Series 2011-2 medium-term notes were replaced, pursuant to the terms of the related series supplements, by financial covenants
identical to the three described in the preceding sentence.
Our ability to comply with these restrictions and covenants will depend on our financial and operating performance, and a violation of any of them
could result in an event of default under these facilities, entitling the relevant lenders to exercise remedies against us, such as acceleration of the maturity of the
relevant indebtedness or, in the case of our asset-backed notes to the extent such covenants are applicable, in an early amortization event. While a default is
continuing under our New Revolving Credit Facility, we would be prohibited from further borrowings and issuances of letters of credit, which could have a
significant adverse effect on our business and results of operations. A default or event of default under one of our debt agreements may also result in a default
or event of default under other debt agreements, with similar adverse consequences to us. There can be no assurance that the relevant lenders would waive any
such violation or that a waiver or replacement financing would be available to us on favorable terms, on a timely basis or at all. In the absence of a waiver or
the availability of replacement financing, our financial condition, results of operations and prospects could be materially and adversely affected.
- 21 -