Avis 2009 Annual Report Download - page 30

Table of Contents
car rental fleet did not result in reduced deferrals, utilization of tax attributes or increased payment of federal and state income taxes. An
extended downsizing of our fleet could result in reduced deferrals, utilization of tax attributes and increased payment of federal and state income
taxes, which could require us to make material cash payments. Such a downsizing or reduction in purchases would likely occur if, and to the
extent, we are unable to obtain financing when our asset backed rental car financings mature and could also occur in connection with a
significant decrease in demand for vehicle rentals. Therefore, we cannot offer assurance that the expected tax deferral will continue or that the
relevant law concerning the program will remain in its current form.
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, 2009, our total debt was approximately $6.5 billion and we had approximately $761 million of available letter of credit
capacity, $275 million of which is available for borrowings, under our senior credit facilities. Our substantial indebtedness could have important
consequences, including:
Our ability to make payments on and refinance our debt depends on our ability to generate cash flow. To some extent, this is subject to
prevailing economic and competitive conditions and to certain financial, business and other factors, many of which are beyond our control. Our
business may not generate cash flow from operations at levels sufficient to permit us to pay principal, premium, if any, and interest on our
indebtedness, and our cash needs may increase. If we are unable to generate sufficient cash flow from operations to service our debt and meet
our other cash needs, we may be forced to reduce or delay capital expenditures, sell or curtail assets or operations, seek additional capital, or
seek to restructure or refinance our indebtedness. If we must sell or curtail our assets or operations, it may negatively affect our ability to
generate revenue.
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 the specified limitations referred to above, the indenture governing our senior unsecured notes
limits, but does not prohibit, us from incurring additional indebtedness in the future.
As noted above, as of December 31, 2009, our senior credit facilities provided us with commitments for additional letters of credit of up to $761
million, $275 million of which is available for borrowings. All of those borrowings would be secured and the lenders under our senior credit
facilities 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 could intensify.
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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, or 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
• 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.