Avis Budget Group Inc. (CAR) plans to offer $250 million in
five-year convertible senior notes and buy a convertible note
hedge.
The company warned its moves, and resulting moves by
counterparties to hedge their exposure, could affect its share
price. Wall Street took that advice to heart, sending Avis shares
down 9.3%, to $12.05 in after-hours trading.
The car rental company said it will finance the purchase of the
note hedge with a warrant transaction. It could also use the
proceeds for general corporate purposes, including paying off
debt.
Avis will also grant the initial purchasers of the notes the
right to buy an additional $37.5 million of notes to cover
overallotments. The offering is subject to market conditions and
other factors.
Avis has been cutting costs in response to a steep dropoff in
demand in the car-rental industry. Consumers have been cutting back
on travel and tighter credit makes it harder to buy and sell
automobiles.
In August, Avis reported it swung to a second-quarter loss - its
sixth loss in the past seven quarters - on lower volume, but the
company said volumes stabilized in the period.
-By John Kell, Dow Jones Newswires; 212-416-2480;
john.kell@dowjones.com