Shares in rental car companies fall on downgrades

Rental car company stocks fell on Wednesday after the downgrading of shares in Avis Budget and Hertz by a Barclays Capital analyst, who is expecting 2009 to be a week year for the industry.

An analyst at Barclays Capital, Manav Patnaik, has said that “unprecedented economic pressures” will most likely adversely affect rental car companies for the next two quarters, and predicted that the industry may see a recovery during 2010.

“A ‘show me’ story, with a near term theme of ‘survival of the fittest’ is likely to cause volatility in the shares,” Patnaik noted.

The analyst cut the rating for Avis from “Equal Weight” to “Underweight,” citing financing risks faced by the company. He explained that the rental car giant needed to renegotiate covenant restrictions on its corporate debt and, by February, refinance around $2.5 billion in its conduit facilities.

Shares in Avis fell by 4.7 percent, down six cents to $1.19 in Wednesday afternoon’s trading. During the last 52 weeks, the trading range for Avis stock has been from $1.04 to $18.06.

Patnaik also lowered his rating on Hertz from “Overweight” to “Equal Weight.” Shares in Hertz dropped by 12 percent, down 56 cents to $4.20 in Wednesday afternoon’s trading. Hertz shares have traded between $3.64 and $19.58 during the past 52 weeks.

Dollar Thrifty shares lost 4.9 percent of their value, down 6 cents to $1.17. The trading range for the stock over the past 52 weeks has been between 64 cents and $29.16.

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