Avis 2014 Annual Report Download - page 94

F-27
13. Debt under Vehicle Programs and Borrowing Arrangements
Debt under vehicle programs, including related party debt due to Avis Budget Rental Car Funding (AESOP)
LLC (“Avis Budget Rental Car Funding”), consisted of:
As of December 31,
2014 2013
North America – Debt due to Avis Budget Rental Car Funding (a) $ 6,340 $ 5,656
North America – Canadian borrowings (b) 489 400
International – Debt borrowings 690 731
International – Capital leases 314 289
Truck Rental – Debt borrowings 252 226
Other 31 35
Total $ 8,116 $ 7,337
__________
(a) The increase reflects additional borrowings principally to fund an increase in the Company's fleet driven by
increased volume and the acquisition of its Budget licensee for Southern California.
(b) The increase includes additional borrowings to fund an increase in the Company’s fleet driven by the acquisition of
its Budget licensee for Edmonton.
North America
Debt due to Avis Budget Rental Car Funding. Avis Budget Rental Car Funding, an unconsolidated
bankruptcy remote qualifying special purpose limited liability company, issues privately placed notes to
investors as well as to banks and bank-sponsored conduit entities. Avis Budget Rental Car Funding uses the
proceeds from its note issuances to make loans to a wholly-owned subsidiary of the Company, AESOP
Leasing LP (“AESOP Leasing”), on a continuing basis. AESOP Leasing is required to use the proceeds of
such loans to acquire or finance the acquisition of vehicles used in the Company’s rental car operations. By
issuing debt through the Avis Budget Rental Car Funding program, the Company pays a lower rate of
interest than if it had issued debt directly to third parties. Avis Budget Rental Car Funding is not consolidated,
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, 2014,
approximate $8.0 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 investment 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