Avis 2010 Annual Report Download - page 31

Table of Contents
We may be unable to remain in compliance with the financial or other covenants contained in our debt instruments, including our senior
credit facilities.
Many of our debt instruments, including our senior credit facilities, contain financial and other covenants that impose significant requirements on
us and limit our ability to engage in certain transactions or activities. There can be no assurance that we will be able to generate sufficient
earnings to enable us to satisfy the financial covenants included in our debt instruments. Our failure to comply with these covenants, if not
waived, would cause a default under the senior credit facilities and could result in principal under our $2.05 billion of asset-backed conduit
facilities being required to be repaid from a portion of vehicle disposition proceeds and lease payments we make to our vehicle program
subsidiaries. If such a failure were to occur, there can be no assurance that we would be able to refinance or obtain a replacement for such
facilities and in certain circumstances such failure could also give rise to a default under the instruments that govern our other indebtedness.
We can be adversely impacted by disruptions in the credit and asset-backed securities markets, which could lead to increases in interest rates
and could disrupt our ability to obtain financing for our operations, which require substantial capital.
We rely upon financing for our operations, particularly asset-backed financing, through asset-backed securities and the lending market, for our
vehicle fleet. Our total asset-
backed debt as of December 31, 2010 was approximately $4.5 billion, with available capacity of approximately $2.4
billion. Our $2.05 billion asset-backed domestic rental car conduit facility (under which $30 million was outstanding at December 31, 2010)
consists of a 364-day facility which matures in October 2011 and a two-year facility which matures in October 2012, each with a maximum
available amount of $1.025 billion. If the asset-backed financing market is disrupted for any reason, we may be unable to obtain refinancing for
our operations at current levels, or at all, when our asset-backed rental car financings mature, and any new financing or refinancing of our
existing financing could increase our borrowing costs, including due to an increase in required collateral levels. In addition, we could be subject
to increased collateral requirements to the extent we request any amendment or renewal of any of our existing financing.
Ambac Assurance Corporation and MBIA Insurance Corporation provide financial guaranties for approximately $900 million and $300 million,
respectively, of our approximately $4.0 billion of domestic term asset-backed car rental financing outstanding at December 31, 2010. The debt
ratings of these financial guaranty firms have been downgraded significantly from the time in which the guarantees were entered into, and the
firms have substantially curtailed their issuance of new guaranties. Therefore we are unlikely to be able to offer similar financial guaranties in
connection with any refinancing we pursue for our term asset-backed financings. Assured Guaranty Corp. is also the provider of a financial
guaranty for $250 million of our term asset-backed car rental financing. Certain insolvency events in respect of the financial guarantors of our
outstanding term asset-backed financings would result in principal of the related financing being required to be repaid sooner than anticipated
from a portion of the proceeds of ordinary course vehicle disposition and lease payments we make to our vehicle program subsidiaries. If such
financings were not so repaid, these financial guarantor insolvency events could also result in the noteholders of the series of asset-backed notes
guaranteed by the insolvent financial guarantor instructing the trustee to direct the return of program vehicles and/or the sale of non-program
vehicles to generate proceeds sufficient to repay such series of notes. If such a financial guarantor insolvency event were to occur, there can be
no assurance that we would be able to replace the relevant financings on reasonable terms or at all.
An increase in interest rates would increase the cost of servicing our debt and could reduce our profitability.
A portion of our borrowings, primarily our vehicle-
backed borrowings, bear interest at variable rates and expose us to interest rate risk. If interest
rates increase, whether because of an increase in market interest rates or an increase in our own cost of borrowing, our debt service obligations
for our variable rate indebtedness would increase even though the amount of borrowings remained the same, and our results of operations could
be adversely affected. As of December 31, 2010, our total outstanding debt of approximately $7.0 billion included
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