Are there any off-balance sheet arrangements disclosed that could affect the Consolidated Statements of Cash Flows for Budget?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
• | |
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. AESOP Leasing's activities, an obligation to absorb a majority of its expected losses and t
on our Consolidated Balance Sheets within assets under vehicle programs and liabilities under vehicle programs, respectively. The assets of AESOP Leasing, included within assets under vehicle programs (excluding the investment in Avis Budget Rental Car Funding (AESOP) LLC—related party) are restricted.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, Budget utilizes an unconsolidated entity named Avis Budget Rental Car Funding to secure lower interest rates on debt. Avis Budget Rental Car Funding issues privately placed notes to investors, banks, and bank-sponsored conduit entities and then uses the proceeds to make loans to Budget's subsidiary, AESOP Leasing, for vehicle acquisitions. Because Avis Budget Rental Car Funding is not consolidated into Budget's financial statements, its results of operations and cash flows are not reflected in Budget's consolidated financials.
AESOP Leasing is consolidated because Budget is the primary beneficiary. AESOP Leasing uses loans from Avis Budget Rental Car Funding to acquire vehicles for Budget's rental car operations. The assets of AESOP Leasing are restricted and can only be used to repay AESOP Leasing liabilities and purchase new vehicles. Creditors of AESOP Leasing and Avis Budget Rental Car Funding cannot access Budget's general credit.
As of December 31, 2024, Budget held $751 million in Class R notes issued by Avis Budget Rental Car Funding, while on December 31, 2023, Budget held $841 million. Deferred financing fees related to debt due to Avis Budget Rental Car Funding were $60 million as of December 31, 2024, and $61 million as of December 31, 2023. These arrangements allow Budget to finance its vehicle fleet more efficiently, but prospective franchisees should understand the complexities of these off-balance sheet entities and their potential impact on Budget's overall financial health. Franchisees should also note that derivatives issued by Avis Budget Rental Car Funding are excluded, but certain amounts are included within accumulated other comprehensive income (loss).