Fitch puts Avis on ratings watch over Dollar Thrifty takeover offer
By APFriday, July 30, 2010
Fitch puts Avis on ratings watch
NEW YORK — Fitch Ratings said Friday that it has put Avis Budget Group Inc. on ratings watch to due Avis’s $1.38 billion offer for Dollar Thrifty Automotive Group.
Fitch said the decision, which affects $2.1 billion of company debt, is based on several possible outcomes of Avis’ potential bidding war with Hertz Global Holdings for Dollar Thrifty.
Dollar Thrifty previously agreed to a merger agreement with Hertz for about $1.17 billion in cash and stock. Dollar Thrifty said this week that it would study the Avis offer.
Fitch said that acquiring Dollar Thrifty could complement Avis’ Budget brand and build its position in the U.S. rental car market. That could result in “positive rating momentum” according to Fitch. But if Avis and Hertz engage in a bidding war that drives up the price, Avis’ rating could be negatively affected. Fitch said this could occur if Avis is forced to increase the debt it needs to close the deal if Hertz comes back with a higher counter offer.
If the sale to Hertz goes through, Fitch said that Avis’s current ratings will most likely be affirmed.
Avis shares rose 46 cents, or 3.9 percent, to close at $12.34.
