Europcar Reports Financial Milestones

Last Tuesday, Europcar announced important milestones achieved in optimising its maturity profile and capital structure. It also revealed amendments made to some of its key financing arrangements.

One of the milestones is the car hire group’s Senior Asset Revolving Facility receiving a successful “A” level rating from Standard & Poor’s. The facility provides a dedicated facility under which withdrawals are made available only for the financing of maintenance and acquisitions for the company’s fleet in France, Spain, Italy and Germany. The facility was initially entered on July 30, 2010 and has been amended until April 5 this year in certain respects.

This was principally a result of the “A” rating from Standard & Poor’s with respect to Securitifleet Holdings, the borrower. Securitifleet Holdings allowed Europcar to: provide for a dynamic advance rate scheme that enables the group to benefit from liquidity increases; provide for increased flexibility on vehicle eligibility criteria and concentration; reduce the margin payable under the facility from 3% to 2.7%; and reduce the total facility commitment from €1.3 billion to €1.1 billion.

Another milestone was an amendment to the Senior Revolving Credit Facility. On April 19, Europcar amended the facility with a group of existing and new lenders. This was mainly done to extend its maturity, which was due for May next year. The amendment was signed subject to customary conditions precedent and extended the maturity date to April 15, 2015. It has two one-year extension options, with a final maturity of April 19, 2017. The margin will only increase to a total 3.75%.

Europcar has also made commitments to extend the maturity of its UK fleet financing. The current long-term facilities are due to mature at the end of the year, and the company has materially progressed in negotiations with Lombard North Central plc and Lloyds TSB Bank plc for the renewal. It’s actively progressing in talks with OEMs as well. Europcar had received commitments from Lombard and Lloyds as of last Tuesday in relation to new vehicle financing facilities in the amounts of £175 million and £200 million respectively. With these facilities, the company will acquire vehicles from the manufacturers and then sold to lessors and operated in lease-back deals.

The final milestone reported is an amendment to Europcar’s principal swap agreement. The group entered the interest rate swap agreement in December 2010 with a maturity date of January 17, 2015. The company is required to pay a fixed interest expense between 2.42% and 2.45% on the outstanding notional amount of €1.3 billion and received interest income. Earlier this month, it signed certain amendments to the agreement so that the notional principal amount has been reduced to €900 million and the fixed interest was dropped to 0.66%.

Due to these milestones, Europcar has extended all of its maturities to at least 2015 – except the bonds maturing in May next year and the “A” rated Senior Asset Revolving Facility that matures in 2014. Principal shareholder Eurazeo has committed to inject €90 million of equity simultaneously with the bond refinancing to provide the car rental company with support for the refinancing of the bonds in May next year. This will allow the group to decrease leverage ratios.

Europcar chief financial officer Caroline Parot says they provided an update on their refinancing plans on March 29. She’s pleased to say that they have achieved all but one of the milestones. They are working with their banks to refinance the remaining near-term maturity – the FRN to mature in May next year. They are reviewing conditions in the market and will choose timing that will optimise execution for the company.