Avis 2007 Annual Report Download - page 99

Table of Contents
(a)
The change in the balance at December 31, 2007 principally reflects the issuance of vehicle-
backed floating rate notes during the first
six months of 2007 to support the acquisition of rental vehicles within the Company’s Domestic Car Rental operations.
(b)
The change in the balance at December 31, 2007 primarily reflects incremental borrowings during the year ended December 31, 2007
to support the acquisition of rental vehicles within the Budget Truck rental fleet.
Avis Budget Rental Car Funding (AESOP), LLC . Avis Budget Rental Car Funding, an unconsolidated bankruptcy remote qualifying
special purpose limited liability company, issues private placement notes that at issuance are typically “AAA” rated generally with
principal and interest payments guaranteed by independent insurance companies. Avis Budget Rental Car Funding then uses the proceeds
from such issuances to make loans to a wholly-owned subsidiary of the Company, AESOP Leasing LP (“AESOP Leasing”) on a
continuing basis. By issuing debt through the AESOP program, Avis Budget pays a lower rate of interest than if the Company had issued
debt directly to third parties. AESOP Leasing is then required to use these proceeds to acquire or finance the acquisition of vehicles used in
the Company’s rental car operations. As a result, AESOP Leasing’s obligation to Avis Budget Rental Car Funding is reflected as related
party debt on the Company’
s Consolidated Balance Sheets as of December 31, 2007 and 2006. The Company also recorded an asset within
assets under vehicle programs on its Consolidated Balance Sheets at December 31, 2007 and 2006, which represented the equity issued to
the Company by Avis Budget Rental Car Funding. The vehicles purchased by AESOP Leasing remain on the Company’s Consolidated
Balance Sheet as AESOP Leasing is consolidated by the Company. Such vehicles and related assets, which approximate $6.7 billion and
the majority of which are subject to manufacturer repurchase and guaranteed depreciation agreements, collateralize the debt issued by Avis
Budget Rental Car Funding and are not available to pay the obligations of the Company.
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 Consolidated Financial Statements. Borrowings
under the Avis Budget Rental Car Funding program primarily represent floating rate term notes with a weighted average interest rate of 5%
for both 2007 and 2006 and 4% for 2005.
Truck financing . The Budget Truck Funding program consists of debt facilities established by the Company to finance the acquisition of
the Budget Truck rental fleet. The borrowings under the Budget Truck Funding program are collateralized by $296 million of
corresponding assets and are floating rate term loans with a weighted average interest rate of 5% in 2007 and 2006. The Company has also
obtained a portion of its truck rental fleet under capital lease arrangements for which there are corresponding gross assets of $361 million
and $381 million with accumulated amortization of $154 million and $129 million classified within vehicles, net on the Company’s
Consolidated Balance Sheets as of December 31, 2007 and 2006, respectively. Interest paid as part of capital lease obligations was $10
million and $20 million during 2007 and 2006, respectively.
Other . Borrowings under the Company’s other vehicle rental programs primarily represent amounts issued under financing facilities that
provide for borrowings to support the acquisition of vehicles used in the Company’s international vehicle rental operations and new fleet
loans to support the acquisition of certain vehicles for Domestic Car Rental operations. The debt issued is collateralized by $1.1 billion of
vehicles and related assets and primarily represents floating rate bank loans and a commercial paper conduit facility for which the weighted
average interest rate was 6%, 5% and 4% for 2007, 2006 and 2005, respectively.
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(c)
The change in the balance at December 31, 2007 primarily reflects incremental borrowings to support the acquisition of vehicles in
its International Car Rental operations and new fleet loans to support the acquisition of certain vehicles for Domestic Car Rental
operations.