Why does Budget issue debt through the Avis Budget Rental Car Funding program?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
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. AESOP Leasing's activities, an obligation to absorb a majority of its expected losses and t
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the Avis Budget Rental Car Funding program allows Budget to secure lower interest rates on debt than it would if it issued debt directly to third parties. Avis Budget Rental Car Funding is structured as an unconsolidated, bankruptcy-remote, special-purpose limited liability company that issues privately placed notes to investors, banks, and bank-sponsored conduit entities.
The funds generated from these note issuances are then used by Avis Budget Rental Car Funding to provide loans to AESOP Leasing, a wholly-owned subsidiary of Budget. AESOP Leasing uses these loan proceeds to acquire or finance the acquisition of vehicles for Budget's rental car operations. This arrangement allows Budget to keep the debt off its consolidated balance sheets, as Avis Budget Rental Car Funding is not consolidated due to Budget not being the primary beneficiary of its activities.
This structure benefits Budget by providing access to capital at a reduced interest rate and by optimizing its financial statements. The creditors of AESOP Leasing and Avis Budget Rental Car Funding have no recourse to Budget's general credit, further isolating the risk associated with vehicle financing. Budget periodically provides Avis Budget Rental Car Funding with non-contractually required support, in the form of equity and loans, to serve as additional collateral for the debt issued by Avis Budget Rental Car Funding.