Thrifty Car Rental 2010 Annual Report Download - page 23

Event of Bankruptcy with Respect to One or More Monolines
As of December 31, 2010, our obligations under our asset-backed medium-term notes total
$1.0 billion in principal amount and are supported by note guaranty insurance policies issued by
Ambac Assurance Corporation (“AMBAC”) and Financial Guaranty Insurance Company (“FGIC”),
both of which have been facing significant financial challenges. These Monolines have undertaken
significant restructuring actions to meet these challenges, but the financial guaranty industry as a
whole continues to face substantial pressures. An event of bankruptcy with respect to either of these
Monolines could trigger an amortization of our obligations under the affected medium-term notes,
which would require a more rapid repayment (or refinancing) of those notes.
During 2010, we added $950 million of fleet financing capacity, of which $750 million is
intended to provide a funding source for future debt maturities, including any future rapid
amortization events that would occur with respect to AMBAC or FGIC. If both series of Monoline-
supported medium-term notes were to undergo amortization concurrently (e.g., due to simultaneous
rapid amortizations, or rapid amortization under one series occurring during another series’
scheduled amortization period), we believe we would need approximately $200 million of additional
fleet financing to retire the affected notes while maintaining peak summer fleet levels in 2011. If we
were unable to access the asset-backed financing markets in a timely manner, we believe that we
would be able to meet our repayment obligations using our existing available fleet financing capacity
and cash on hand, although our ability to finance peak fleet levels during the second and third
quarters of 2011 could be impaired. A reduction in fleet levels during the peak season could in turn
have an adverse effect on our results of operations and cash flow. In order to minimize the financial
impact of a reduced fleet, we would likely need to extend further the holding period of our vehicles or
take other actions, such as further reductions of our operations and workforce.
FGIC is the Monoline that has provided financial insurance with respect to our Series 2007-1
notes. On October 25, 2010, FGIC indicated that it had not received sufficient participation in its
offer to exchange certain residential mortgage-backed securities and asset-backed securities insured
by it, and that, consequently, FGIC had not satisfied the conditions for successfully effectuating its
surplus restoration plan as required by the New York State Insurance Department (“NYID”). On
December 2, 2010, holders of securities guaranteed by FGIC announced that they had formed a
committee of policyholders to negotiate a proposed restructuring plan, with the goal of reinstating
FGIC’s ability to satisfy policyholder claims in 2011. As of February 28, 2011, a restructuring has not
yet been completed, and the NYID has taken no further public action with respect to FGIC. The
NYID may at any time seek an order of rehabilitation or liquidation of FGIC, which could result,
immediately or after a period of time, in an event of bankruptcy with respect to FGIC under the terms
of the Series 2007-1 notes, depending on the circumstances. Additionally, we have received
correspondence from certain entities asserting their beneficial ownership of more than 50% of the
Series 2007-1 notes and contending that an amortization event occurred under the related indenture
as a result of, among other things, the NYID order, dated November 24, 2009, suspending payments
by FGIC under its policies pending the removal of FGIC’s capital impairment. We believe this
assertion is completely without merit and, in our capacity as master servicer, we have so directed the
trustee. There is, however, no assurance that these entities will not pursue their claim seeking to
establish that the notes are currently subject to a rapid amortization event, which, if successful, could
have the consequences described above.
AMBAC is the Monoline providing financial insurance with respect to our Series 2006-1
notes. AMBAC and its parent company have been subject to or undertaken several restructuring
actions, including the filing of a Chapter 11 bankruptcy by the parent company on November 8, 2010.
In March 2010, AMBAC was required to establish a segregated account of policies by the Office of
the Commissioner of Insurance of the State of Wisconsin (the “OCIW”), although it has been
continuing operations and paying claims in the ordinary course on policy obligations that were not
included in that account. Our Series 2006-1 notes were not included in the segregated account,
although there is no assurance that the OCIW will not take further action with respect to the
instruments not included in the segregated account. Any such action could result in a rapid
amortization under the notes. The Series 2006-1 notes began scheduled amortization in December
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