Avis 2015 Annual Report Download - page 96

F-27
Americas
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, 2015,
approximate $8.6 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
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.
During February 2014 and July 2014, Avis Budget Rental Car Funding issued approximately $675 million in
asset-backed notes with an expected final payment date of July 2019 and $500 million in asset-backed notes
with an expected final payment date of February 2020, respectively. During January 2015 and May 2015,
Avis Budget Rental Car Funding issued approximately $650 million in asset-backed notes with an expected
final payment date of July 2020 and approximately $550 million in asset-backed notes with an expected final
payment date of December 2020, respectively. The Company used the proceeds from these borrowings to
fund the repayment of maturing vehicle-backed debt and the acquisition of rental cars in the United States.
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, 2015 and 2014.
Debt 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 Company finances the acquisition of fleet for its truck rental
operations in the United States through a combination of debt facilities and leases. These debt borrowings
represent a mix of fixed and floating rate debt and had a weighted average interest rate of 3% as of
December 31, 2015 and 2014.