Does the FDD disclose any related party transactions that could affect the Consolidated Statements of Cash Flows for Budget?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
| 2024 | 2023 | |
|---|---|---|
| (9) | S 14,14 | 3 $ 15,502 |
| Americas – Debt due to Avis Budget Rental Car Funding (a) | 1,160 | 0 1,075 |
| Americas - Debt borrowings | 2.15 | 9 2,203 |
| International – Debt borrowings | 14: | 3 172 |
| International – Finance leases | · · · | 8 55 |
| Other | (7) | 7) (70) |
| Deferred financing fees (b) | $ 17.53 | 6 $ 18,937 |
| Total | • |
Includes $751 million and $841 million of Class R notes as of December 31, 2024 and December 31, 2023, respectively, which are held by us. Deferred financing fees related to Debt due to Avis Budget Rental Car Funding as of December 31, 2024 and 2023 were $60 million and $61 million, respectively.
Debt due to Avis Budget Rental Car Funding. Avis Budget Rental Car Funding, an unconsolidated bankruptcy remote qualifying special purpose limited liability company, issues privately placed notes to investors as well as to banks and bank-sponsored conduit entities. Avis Budget Rental Car Funding uses the proceeds from its note issuances to make loans to our wholly-owned subsidiary, AESOP Leasing investors as well as to banks and bank-sponsored conduit entities. Avis Budget Rental Car Funding basis. AESOP Leasing is required to use the proceeds of such loans to acquire or finance the acquisition of vehicles used in our rental car operations. By issuing debt through the Avis Budget Rental Car Funding program, we pay a lower rate of interest than if we had issued debt directly to third parties. Avis Budget Rental Car Funding is not consolidated, as we are not the primary beneficiary" of Avis Budget Rental Car Funding. We determined that we are not the primary beneficiary because we do not have the obligation to absorb the potential losses or receive the benefits of "primary beneficiary" of Avis Budget Rental Car Funding's activities since our only significant source of variability in the earnings, losses or cash flows of Avis Budget Rental Car Funding is exposure to our own creditworthiness, due our form Avis Budget Rental Car Funding. Because Avis Budget Rental Car Funding is not consolidated. As SoD Leasing's loan obligations to Avis Budget Rental Car Funding are reflected as related to our loan from Avis Budget Rental Car Funding is not consolidated. As SoD Leasing is consolidated balance Sheets which represents securities issued to us by Avis Budget Rental Car Funding. AESOP Leasing is consolidated, as we are the "primary beneficiary" of AESOP Leasing; as a result, the vehicles purchased by AESOP Leasing remain on our Consolidated Balance Sheets which represents securities issued to us by Avis Budget Rental Car Funding.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, there are related party transactions that could affect the Consolidated Statements of Cash Flows. Specifically, Budget has a debt arrangement with Avis Budget Rental Car Funding, an unconsolidated bankruptcy remote qualifying special purpose limited liability company. This entity issues privately placed notes to investors, banks, and bank-sponsored conduit entities and uses the proceeds to make loans to Budget's wholly-owned subsidiary, AESOP Leasing, to acquire vehicles for Budget's rental car operations.
Budget benefits from this arrangement by paying a lower interest rate than if they issued debt directly to third parties. As of December 31, 2024, Budget held $751 million in Class R notes, and $841 million as of December 31, 2023. Deferred financing fees related to Debt due to Avis Budget Rental Car Funding as of December 31, 2024 and 2023 were $60 million and $61 million, respectively. Although Avis Budget Rental Car Funding is not consolidated in Budget's financial statements because Budget is not the primary beneficiary, AESOP Leasing is consolidated because Budget is the primary beneficiary.
For a prospective franchisee, this related-party transaction indicates that Budget utilizes complex financial structures to manage its debt and vehicle financing. While this may result in lower interest rates, it also adds complexity to the financial statements. Franchisees should be aware that understanding these transactions may require a deeper analysis of Budget's financial condition and its relationship with related entities. It's important to note that the effects of derivatives issued by Avis Budget Rental Car Funding are not included, as it is not consolidated by Budget; however, certain amounts related to these derivatives are included within accumulated other comprehensive income (loss).