Dollar Rent A Car 2007 Annual Report Download - page 47

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Vehicle manufacturer and bank lines of credit provided $312 million in capacity at December 31, 2007.
Borrowings of $234.5 million were outstanding under these lines at December 31, 2007. These lines of
credit are secured by the vehicles financed under these facilities and are primarily renewable annually.
The Company expects to continue using these sources of vehicle financing in 2008 and future years. The
vehicle manufacturer and bank lines of credit contain a leverage ratio covenant which requires that the
Company’s corporate debt to corporate EBITDA be maintained within certain limits as defined in the
respective agreements. The Company is in compliance with this covenant at December 31, 2007.
Senior Secured Credit Facilities
On June 15, 2007, the Company entered into $600 million in new Senior Secured Credit Facilities
comprised of a $350 million Revolving Credit Facility and a $250 million Term Loan. The Senior Secured
Credit Facilities contain certain financial and other covenants, including a covenant that sets the
maximum amount the Company can spend annually on the acquisition of non-vehicle capital assets, a
maximum leverage ratio and a limitation on cash dividends and share repurchases, and are collateralized
by a first priority lien on substantially all material non-vehicle assets of the Company. As of December 31,
2007, the Company is in compliance with all covenants.
The Revolving Credit Facility, which replaced the Company’s former $300 million revolving credit facility,
expires on June 15, 2013, and will be used to provide working capital borrowings and letters of credit.
Interest rates on loans under the Revolving Credit Facility are, at the option of the Company, based on
either prime rates, which are payable quarterly, or Eurodollar rates, which are payable based on an
elected interest period of one, two, three or six months. The Revolving Credit Facility permits the
combination of letter of credit usage and working capital borrowing up to $350 million with no sublimits on
either. The Company had letters of credit outstanding under the Revolving Credit Facility of approximately
$172.3 million and no working capital borrowings at December 31, 2007.
The Term Loan expires on June 15, 2014, and was used to repay asset backed vehicle debt, thereby
providing additional credit enhancement to the vehicle financing facilities. The Term Loan allows the
Company greater flexibility to finance Non-Program Vehicles and vehicle purchases from non-investment
grade manufacturers. The Term Loan requires minimum quarterly principal payments which began in
September 2007, but depending on the level of excess cash flows and other factors, the required
principal payments may be increased. At December 31, 2007, the Company had $248.8 million
outstanding under the Term Loan.
Debt Servicing Requirements
The Company will continue to have substantial debt and debt service requirements under its financing
arrangements. As of December 31, 2007, the Company’s total consolidated debt and other obligations
were approximately $2.7 billion, of which $2.4 billion was secured debt for the purchase of vehicles. The
majority of the Company’s vehicle debt is issued by special purpose finance entities as described herein
all of which are fully consolidated into the Company’s financial statements. The Company has scheduled
annual principal payments for vehicle debt of approximately $900 million in 2008, including the annual
renewal of its 364-day credit facilities, and $500 million per year from 2010 through 2012. The Company
has minimal scheduled annual principal payments relating to its Term Loan through 2013 with the
remaining lump sum due in 2014.
The Company intends to use cash generated from operations and from the sale of vehicles for debt
service and, subject to restrictions under its debt instruments, to make capital investments. The Company
has historically repaid its debt and funded its capital investments (aside from growth in its rental fleet) with
cash provided from operations and from the sale of vehicles. The Company has funded growth in its
vehicle fleet by incurring additional secured vehicle debt and with cash generated from operations. The
Company expects to incur additional debt from time to time to the extent permitted under the terms of its
debt instruments.
The Company has significant requirements for bonds and letters of credit to support its insurance
programs and airport concession obligations. At December 31, 2007, various insurance companies had
$39.9 million in surety bonds and various banks had $68.9 million in letters of credit to secure these
obligations. At December 31, 2007, these surety bonds and letters of credit had not been drawn upon.
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