Rental car company stocks fall after downgrading

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Car Rental News - 13/11/2008


On Wednesday shares in Avis Budget and Hertz dropped after downgrading by an industry analyst.

Manav Patnaik, a Barclays Capital analyst, says that "unprecedented economic pressures" are expected to impact rental car company performance over the next two quarters, and predicts that although the industry is likely to see a week 2009, it should recover in 2010.

"A 'show me' story, with a near term theme of 'survival of the fittest' is likely to cause volatility in the shares," he said.

Patnaik cut his Avis rating from "Equal Weight" to "Underweight," due to financing risks the company faces. According to the analyst, Avis will need to renegotiate its corporate debt covenant restrictions and refinance approximately $2.5 billion in conduit facilities by February.

Avis shares were down by six cents to $1.19 in afternoon trading on Wednesday. Over the last year, the company’s shares have traded in a range from $1.04 to $18.06.

Patnaik also lowered his Hertz rating from "Overweight" to "Equal Weight." Hertz shares fell by 56 cents to $4.20 in Wednesday afternoon’s trading. The company’s shares have traded between $3.64 and $19.58 in the last year.

Dollar Thrifty shares ended the day on Wednesday down 6 cents to $1.17. The trading range for the company’s shares over the last year has been between 64 cents and $29.16.

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