Avis 2006 Annual Report Download - page 25

Table of Contents
Significant increases in fuel costs or limitations in fuel supplies could harm our business.
We could be adversely affected by limitations in fuel supplies or significant increases in fuel prices. A severe or protracted disruption in fuel
supplies or significant increases in fuel prices could have a material adverse effect on our financial condition and results of operations, either by
directly discouraging consumers from renting cars and trucks or by causing a decline in airline passenger traffic.
Risks related to our indebtedness
We have a substantial amount of debt which could impair our financial condition and adversely affect our ability to react to changes in our
business.
As of December 31, 2006, our total debt was approximately $7.1 billion and we had approximately $1.2 billion of available borrowing capacity
under our senior secured credit facility.
Our substantial indebtedness could have important consequences, including:
Despite our current indebtedness levels, we may still be able to incur substantially more debt. This could further exacerbate the risks
associated with our substantial indebtedness.
Subject to specified limitations, the indenture governing our senior unsecured notes limits, but does not prohibit, ABCR or its subsidiaries from
incurring additional indebtedness in the future. As of December 31, 2006, ABCR’s senior secured credit facility provided us commitments for
additional borrowings of up to $1.2 billion, in the aggregate. All of those borrowings would be secured and the lenders under ABCR’s senior
secured credit facility would have a prior claim to the assets that secure such indebtedness. If new debt is added to our current debt levels, the
risks described above in the previous risk factor could intensify.
Restrictive covenants in agreements and instruments governing our debt may adversely affect our ability to operate our business.
The indenture governing our senior unsecured notes and the agreement governing ABCR’
s senior secured credit facility contain, and our future
debt instruments may contain various provisions that limit our ability to, among other things:
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• limiting our ability to borrow additional amounts to fund working capital, capital expenditures, debt service requirements, execution
of our business strategy, acquisitions and other purposes;
• requiring us to dedicate a substantial portion of our cash flow from operations to pay principal and interest on our debt, which would
reduce the funds available to us for other purposes;
• making us more vulnerable to adverse changes in general economic, industry and competitive conditions, in government regulation
and in our business by limiting our flexibility in planning for, and making it more difficult for us to react quickly to, changing
conditions; and
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exposing us to risks inherent in interest rate fluctuations because some of our borrowings are at variable rates of interest, which could
result in higher interest expenses in the event of increases in interest rates.
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incur additional debt;
•
provide guarantees in respect of obligations of other persons;
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issue redeemable stock and preferred stock;