Shares in Avis and Hertz fall on liquidity concerns

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On Tuesday, shares in both Avis Budget Group and Hertz Global Holdings fell after liquidity concerns were raised about both rental car giants by an industry analyst, who added that Avis may be in violation of debt obligations before the end of this quarter.

Brian A. Johnson, an analyst with Barclays Capital, said that the companies are “facing an almost perfect storm, with increasing pressure on both revenues and costs, coupled with very large risks on the liquidity and operational side.”

The companies’ rental-car divisions have been significantly affected by declines in air travel and cutbacks in business and leisure travel spending. Both companies also have truck and equipment-rental divisions, and they are suffering from a decline in commercial and construction activity.

Johnson noted that Avis and Hertz seem to have sufficient liquidity to meet this year’s refinancing needs, but the availability of 2010 financing is in question.

“In better times for the credit market, much of the fleet financing was done through (asset-backed securitization), but that source of capital has dried up in the current market,” Johnson added.

According to the analyst, Avis is at risk of being in violation of its credit facility obligations, which were amended near the end of last year.

Thanks to www.forbes.com for the above quotes, for more information on this article please visit their website.

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