OREANDA-NEWS. S&P Global Ratings today assigned its 'B+' issue rating and '5' recovery rating to Parsippany, N. J.-based car and truck renter Avis Budget Group Inc.'s (Avis Budget) €250 million senior notes due 2024. The '5' recovery rating indicates our expectation that lenders would receive modest recovery (10%-30%; upper half of the range) of their principal in the event of a payment default.

Avis Budget Finance plc is issuing the notes. The proceeds will be used to redeem a portion of the 6.000% senior notes due 2021, to pay fees and other related offering expenses, and for general corporate purposes.

Our ratings on Avis Budget reflect the company's position as one of the largest global car rental companies and the price-competitive and cyclical nature of on-airport car rentals. Our ratings also incorporate the relatively stable cash flow that the company's car rental business generates--even during periods of earnings weakness--and its substantial capital spending requirements, which it has the ability to reduce if industry or economic conditions warrant. We assess the company's business risk profile as fair and its financial risk profile as aggressive.

The stable outlook on Avis Budget reflects our expectation that despite some pricing pressure, we expect credit metrics to remain relatively consistent through 2016, with EBITDA interest coverage in the high-5x area, funds from operations (FFO) to debt in the high teens and low-20% area, and debt to EBITDA in the low-4x area. We could raise the ratings if the company is able to execute on its various operating initiatives, including fleet and pricing optimization, such that EBITDA interest coverage would exceed 6x and FFO to debt would rise to the low-20% area and remain there over a sustained period. Although unlikely over the next year, we could lower the rating if pricing pressure is greater than expected, causing FFO to debt to decline to the mid-teens percent area and EBITDA interest coverage to decline to 4.5x and remain there on a sustained basis.