Avis 2013 Annual Report Download - page 100

F-28
as the Company is not the “primary beneficiary” of Avis Budget Rental Car Funding. The Company
determined that it is not the primary beneficiary because the Company does not have the obligation to
absorb the potential losses or receive the benefits of Avis Budget Rental Car Funding’s activities since the
Company’s only significant source of variability in the earnings, losses or cash flows of Avis Budget Rental
Car Funding is exposure to its own creditworthiness, due to its loan from Avis Budget Rental Car Funding.
Because Avis Budget Rental Car Funding is not consolidated, AESOP Leasing’s loan obligations to Avis
Budget Rental Car Funding are reflected as related party debt on the Company’s Consolidated Balance
Sheets. The Company also has an asset within Assets under vehicle programs on its Consolidated Balance
Sheets which represents securities issued to the Company by Avis Budget Rental Car Funding. AESOP
Leasing is consolidated, as the Company is the “primary beneficiary” of AESOP Leasing; as a result, the
vehicles purchased by AESOP Leasing remain on the Company’s Consolidated Balance Sheets. The
Company determined it is the primary beneficiary of AESOP Leasing, as it has the ability to direct its
activities, an obligation to absorb a majority of its expected losses and the right to receive the benefits of
AESOP Leasing’s activities. AESOP Leasing’s vehicles and related assets, which as of December 31, 2013,
approximate $7.3 billion and many of which are subject to manufacturer repurchase and guaranteed
depreciation agreements, collateralize the debt issued by Avis Budget Rental Car Funding. The assets and
liabilities of AESOP Leasing are presented on the Company’s Consolidated Balance Sheets within Assets
under vehicle programs and Liabilities under vehicle programs, respectively. The assets of AESOP Leasing,
included within Assets under vehicle programs (excluding the Investments in Avis Budget Rental Car
Funding (AESOP) LLC—related party) are restricted. Such assets may be used only to repay the respective
AESOP Leasing liabilities, included within Liabilities under vehicle programs, and to purchase new vehicles,
although if certain collateral coverage requirements are met, AESOP Leasing may pay dividends from
excess cash. The creditors of AESOP Leasing and Avis Budget Rental Car Funding have no recourse to the
general credit of the Company. The Company periodically provides Avis Budget Rental Car Funding with
non-contractually required support, in the form of equity and loans, to serve as additional collateral for the
debt issued by Avis Budget Rental Car Funding.
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 financial statements. Borrowings
under the Avis Budget Rental Car Funding program primarily represent fixed rate notes and had a weighted
average interest rate of 3% as of December 31, 2013 and 2012.
Canadian borrowings. The Company finances the acquisition of vehicles used in its Canadian rental
operations through a consolidated, bankruptcy remote special-purpose entity, which issues privately placed
notes to investors and bank-sponsored conduits. The Canadian borrowings represent a mix of fixed and
floating rate debt and had a weighted average interest rate of 3% and 4% as of December 31, 2013 and
2012, respectively.
International
Debt borrowings. In March 2013, the Company entered into a three-year, €500 million (approximately $687
million) European rental fleet securitization program, which matures in 2016 and is used to finance fleet
purchases for certain of the Company’s European operations. The Company finances the acquisition of
vehicles used in its International rental car operations through this European and other consolidated,
bankruptcy remote special-purpose entities, which issue privately placed notes to banks and bank-
sponsored conduits. The International borrowings primarily represent floating rate notes and had a weighted
average interest rate of 4% as of December 31, 2013 and 2012.
Capital leases. The Company obtained a portion of its International vehicles under capital lease
arrangements for which there are corresponding assets of $306 million and $317 million, classified within
vehicles, net on the Company’s Consolidated Balance Sheets as of December 31, 2013 and 2012,
respectively. For the years ended December 31, 2013 and 2012, the interest rates on these leases ranged
from 2% to 7% and 2% to 4%, respectively. All capital leases are on a fixed repayment basis and interest
rates are fixed at the contract date.