Presale │ March 27, 2023 fitchratings.com 1
Structured Finance
Asset-Backed Securities
U.S.A.
Avis Budget Rental Car Funding
LLC, Series 2023-3
Capital Structure
Class
Expected
Rating
Expected
Rating
Outlook
Amount
($ Mil.)
a
Minimum
CE (%)
b
Maximum
CE (%)
b
Interest
Rate (%)
Legal Final
Maturity
A
AAAsf
Stable
196,25
31.49
40.27
TBD
February 2028
B
Asf
Stable
30,00
20.46
30.64
TBD
February 2028
C
BBB–sf
Stable
23,75
11.72
23.03
TBD
February 2028
Total
250.00
a
Final note amounts will be sized to market demand.
b
Credit enhancement (CE) is dynamic and will shift with the fleet mix.
TBD – To be determined.
Fitch Ratings expects to rate the ABS notes issued by Avis Budget Rental Car Funding (AESOP)
LLC, Series 2023-3, as listed above. This is the 16th AESOP series rated by Fitch since 2017 and
the third rated in 2023. The notes are secured by a revolving pool of program and non-program
(risk) vehicles from various original equipment manufacturers (OEMs) leased to Avis Budget
Car Rental, LLC (ABCR), a wholly owned subsidiary of Avis Budget Group, Inc. (ABG), which is
not rated (NR) by Fitch. ABCR subleases the vehicles to wholly owned subsidiaries of ABCR
serving various U.S. rental and car share markets.
Key Rating Drivers
Transaction Analysis — Evolving Concentration Limits: Fitch analyzed the structural features,
including a monthly mark-to-market (MTM) vehicle value test and a minimum monthly vehicle
depreciation test, by stressing the liquidation timing, vehicle depreciation, disposition losses
and expected carrying costs of the transaction at various rating levels to determine an expected
loss level (ELL). Credit enhancement (CE) for the notes comprises subordination, letter of
credit(s) (LOC) and dynamic overcollateralization (OC), which will shift according to the fleet
mix. CE levels for each class of notes are sufficient to cover Fitch’s maximum and minimum ELL
for each class under the respective ratings.
Stable Structural Features: The 2023-3 transaction includes structural features that are
consistent with prior recent transactions. The features include OEM concentration limits, the
inclusion of medium- and heavy-duty trucks, and a different minimum depreciation rate of
nonprogram vehicles (NPVs) to account for market value and an increase to the vehicle age limit.
Beginning with the 2022-5 transaction, the used and NPV concentration limits have been
removed and the OEM concentration limit for Tesla has been increased.
Vehicle Value Risks — Stable Depreciation and Residual Realization: While previously much
more volatile, depreciation has steadied and fallen for NPVs as high demand for a limited supply
of vehicles maintains high vehicle valuation and disposition proceeds. Box trucks have limited
performance experience but were assumed to have an annual depreciation rate consistent with
the minimum required depreciation for these vehicles in the first two years of their life, which
exceeds available historical depreciation data.
Inside This Report Page
Key Rating Drivers
1
Highlights
2
Key Transaction
Parties 3
Transaction Comparisons
3
Sector Risks: Additional Perspective
4
Transaction Notes
5
Credit Analysis
5
Asset Analysis
12
Expected Rating Sensitivity
15
Transaction Structure
17
Counterparty Risk
26
Criteria Application, Model and
Data Adequacy 26
Surveillance
27
Appendix 1: Origination and
Servicing 28
Appendix 2: ESG Relevance Score
29
This presale report reflects information in Fitch
Ratings’ possession at the time that Fitch’s
expected ratings are issued. The transaction has
yet to be finalized and changes could occur. As a
result, the expected ratings disclosed in this
report do not r
eflect final ratings but are solely
based on information provided by the issuer as
of
March 27, 2023.
These expected ratings are contingent on final
documents conforming to information already
received. Ratings are not a recommendation to
buy, sell or ho
ld any security. The offering
circular
and other material should be reviewed
prior to any purchase.
The notes are being
offered and sold to qualified intermediary
buyers (QIBs), as defined by Rule 144A of the
Securities Act, or to non
-U.S. entities pursuant
to
regulations.
Fitch’s related Rating Action Commentary
issued at transaction closing will include final
ratings, which will include an assessment of any
material information that may have changed
subsequent to the publication of the presale.
Representations, Warranties and
Enforcement Mechanisms Appendix
Analysts
John Krementowski
, CFA
+1 646 582
-3576
john.krementowski@fitchratings.com
Yiming Liu
, CFA
+1 647 503
-3987
[email protected]
Not for redistribution
Avis Budget Rental Car Funding LLC, Series 2023-3
Presale │ March 27, 2023 fitchratings.com 2
Structured Finance
Asset-Backed Securities
U.S.A.
Collateral Analysis — High Fleet Diversity and Healthy/Stable OEM Financials: AESOP’s car
and light-truck fleet is deemed diverse due to the high degree of OEM, model, segment and
geographical diversification. Concentration limits help to mitigate risks associated with OEM
defaults, declining vehicle values or vehicle recalls. Despite unprecedented rapid de-fleeting of
AESOP vehicles in the wake of the coronavirus pandemic’s impact on travel in 2020, the fleet
remains diverse albeit with a notable shift toward NPVs as auto manufacturers push the burden
of residual values onto rental car companies. Although a strong secondary vehicle market has
continued to support vehicle values, continued supply issues have constrained sales and
purchases, leading to an aging fleet.
Servicer Operational Risks — Adequate Servicer and Fleet Manager: ABCR is deemed an
adequate servicer and administrator, as evidenced by its fleet management abilities and
securitization performance to date. Fitch does not publicly rate ABCR. The company has seen
marked improvement in its rental business off the lows of 2020, with the travel and rental car
sectors improving. Avis’ latest financial results show improved rental volumes and pricing.
Additionally, the fleet has stabilized and AESOP trust performance metrics are within
expectations across depreciation, MTM tests and disposition proceeds. defi AUTO, LLC
(formerly known as Fiserv) is the backup disposition agent, while Lord Securities is the backup
administrator, and both entities have substantial experience in their respective roles.
Highlights
Effect Highlight
–
Aging Fleet Composition: Consistent with market cond
nonprogram concentrations have been increasing and currently account for roughly 99
Avis’ fleet as of Dec. 31, 2022
aged significantly due to vehicle supply constraints, with the age of the fleet of approximately
–
has been removed beginning with the 2022-5
increased for rental car companies through the pandemic due to the lack of new vehicle supply
driven primarily by the semiconductor shortage. Used vehicle values have experienced
significant strength recently, although with softening recently, but are
to pre-pandemic levels in the near
imbalances. The removal of the limit aligns with peer rental fleet ABS issuances.
potential impacts from higher concentrations of used vehicles; therefore, an additi
was not applied with the limit removal.
–
limit, with a CE step-
concentration increase to between 85% and 87.5%, and increases 1% thereafter.
with series 2022-5, this limit has been removed, along with the step-up feature.
1% in CE has been included in the structure for NPV,
Neutral
5, Tesla vehicles can now be included in the trust at up to 25% of the asset base
previously, and the limit may be increased to beyond 25%,
As part of this change, additional CE has been provided through a step-
concentration rise above 15% (calculated
+
meaning that ESG issues are credit-
ESG Navigator in Appendix 2 for details.
The 2
Source: Fitch Ratings
Applicable Criteria
Structured Finance and Covered Bonds
Counterparty Rating Criteria (March 2023)
Global Structured Finance Rating Criteria
(
March 2023)
Global Rental Fleet ABS Rating Criteria
(July 2022)
Key Rating Drivers
(Negative/Positive/Neutral)
Rating Impact Key Rating Driver
Neutral Transaction Analysis
Neutral
Structural Features
Neutral Vehicle Value Risks
Positive Collateral Analysis
Positive
Servicer Operational Risks
Not for redistribution
Avis Budget Rental Car Funding LLC, Series 2023-3
Presale │ March 27, 2023 fitchratings.com 3
Structured Finance
Asset-Backed Securities
U.S.A.
Key Transaction Parties
Transaction Counterparty Summary
Role
Counterparty
Fitch Rating
Issuer
Avis Budget Rental Car Funding (AESOP) LLC
NR
Vehicle Purchasers
AESOP Leasing L.P.
NR
AESOP Leasing Corp. II
NR
Sponsor of the SPVs
Avis Budget Group, Inc.
NR
Administrator/Lessee/
Servicer
Avis Budget Car Rental, LLC
NR
Sublessees
Avis Rent a Car System, LLC
NR
Budget Rent a Car System, LLC
NR
Zipcar, Inc.
NR
Payless Car Rental, Inc. NR
Budget Truck Rental LLC NR
Title Holder Nominees
PV Holding Corp.
NR
Quartx Fleet Management, Inc.
NR
Qualified Intermediary
AESOP Exchange Corporation
NR
Parent of Qualified Intermediary
IPX1031, LLC (Fidelity National Financial, Inc.)
NR
LOC Provider (Expected)
JPMorgan Chase Bank, N.A.
AA/F1+/Stable
Trustee/Collateral Agent
The Bank of New York Mellon Trust Company, N.A.
AA/F1+/Stable
Backup Administrator/
Managing Agent
Lord Securities Corporation
NR
Backup Disposition Agent
defi AUTO, LLC (f/k/a Fiserv Automotive Solutions, Inc.)
NR
Structuring Lead
Citigroup Global Markets Inc.
A+/F1/Stable
NR – Not rated
Source: Fitch Ratings
Transaction Comparisons
Trust AESOP AESOP HVF III
Sponsor
Avis Budget Group, Inc.
Avis Budget Group, Inc.
The Hertz Corporation
Series
2023-3
2023-1
2023-2
Cutoff Date
December 2022
September 2022
December 2022
Lessees — Sublessees
ABCR
ABCR
Hertz
Avis
Avis
Dollar
Budget
Budget
Thrifty
a
Zipcar Zipcar —
Payless
Payless
—
Budget Truck
Budget Truck
—
Avg. Age of Rental Fleet (Mos.)
a
12.8
12.8
11.2
Program Vehicles (%)
1.42
1.09
0.9
Risk Vehicles (%)
98.58
98.91
99.1
Manufacturer 1 (%)
Chrysler (20.0)
Toyota (22.5)
GM (21.6)
Manufacturer 2 (%)
Toyota (19.9)
Chrysler (16.1)
Ford (15.4)
Manufacturer 3 (%)
GM (15.6)
GM (15.4)
Tesla (14.2)
Manufacturer 4 (%)
Ford (14.3)
Ford (15.0)
Nissan (11.6)
Manufacturer 5 (%)
Kia (7.2)
Kia (8.2)
Chrysler (10.6)
Revolving Period (Years)
3.7
5
5
Amortization Period (Mos.)
6
6
6
Not for redistribution
Avis Budget Rental Car Funding LLC, Series 2023-3
Presale │ March 27, 2023 fitchratings.com 4
Structured Finance
Asset-Backed Securities
U.S.A.
Trust
AESOP
AESOP
HVF III
Best Fleet Credit Enhancement (%)
Class A
31.49
31.49
39.96
Class B
20.46
20.46
30.62
Class C
11.72
11.72
22.61
Class D
N.A.
N.A.
11.05
Best Fleet Expected Losses (%)
AAAsf
18.87
18.73
25.59
AAsf
16.97
16.85
20.71
Asf
15.05
14.94
17.79
BBBsf
13.11
13.01
14.85
BBsf
11.16
11.06
11.86
Worst Fleet Credit Enhancement (%)
Class A
40.27
40.27
44.87
Class B
30.64
30.64
36.30
Class C
23.03
23.03
28.94
Class D
N.A.
N.A.
18.33
Worst Fleet Expected Losses (%)
AAAsf 36.96 36.84 38.44
AAsf 32.72 32.61 34.05
Asf 28.41 28.31 29.58
BBBsf 24.05 23.96 25.02
BBsf
19.63
19.55
20.38
Ratings
b
Class A
AAAsf
AAAsf
AAAsf
Class B
Asf
Asf
Asf
Class C
BBB–sf
BBB–sf
BBBsf
Class D
N.A.
N.A.
NRsf
a
For AESOP, the average age of the rental fleet is equal to the trailing three-month average age of the eligible fleet.
b
Ratings for AVIS transactions are expected ratings. GM – General Motors. HVF III – Hertz Vehicle Financing III LLC.
N.A. – Not available. NR – Not rated.
Source: Avis Budget Car Rental, LLC
Sector Risks: Additional Perspective
Key Sector Risks
Sector or Asset Outlook Fitch’s 2023 asset performance outlook for rental fleet ABS has been revised to deteriorating relative to 2022, reflecting
Fitch’s expectation for the moderation observed in 2022 to continue into 2023 but remain below or in line with pre-pandemic
levels. Supply constraints like semiconductor shortages have caused production shutdowns, leading to historically low
inventories, despite strong demand, which has increased secondary values and recoveries. These supply shortages, while
starting to loosen, are expected to continue to support values and overall strong rental fleet ABS performance in 2023.
Macro or Sector Risks
Fitch expects a mild recession to take hold in the U.S. in 2H2023, which will weigh on job growth and consumer demand. High
inflation will lead to a continued increase in interest rates, affecting sectors backed by consumer and real estate assets exposed
to interest rate and refinancing risk. Real income erosion will further burden households, affecting consumer spending and
businesses, especially weaker borrowers. See Fitch’s “Global Economic Outlook – March 2023.”
Relevant Research Fitch has revised its global economic forecasts to reflect its 2023 expectations. Fitch’s outlook for 2023 for structured finance is
detailed in “North America Structured Finance Outlook 2023”. Also, see Fitch’s recent special report, “
In the Auto ABS Driver’s
Seat: 2H22”. Both reports are available on Fitch’s website at www.fitchratings.com.
Source: Fitch Ratings
Not for redistribution
Avis Budget Rental Car Funding LLC, Series 2023-3
Presale │ March 27, 2023 fitchratings.com 5
Structured Finance
Asset-Backed Securities
U.S.A.
Transaction Notes
AESOP ABS note proceeds fund loans from AESOP to the vehicle purchasers, who utilize the
loans to acquire vehicles to lease out to ABCR. ABCR will, in turn, sublease the vehicles to Avis
Rent a Car System, LLC (Avis), Budget Rent a Car System (Budget), Zipcar, Inc., Payless Car
Rental, Inc. (Payless) and Budget Truck Rental LLC (Budget Truck), all wholly owned subsidiaries
of ABCR serving various segments of the rental and car share markets. The vehicle purchaser
may also directly lease vehicles to Avis and Budget.
AESOP ABS notes are ultimately secured by lease payments from the lessees and sublessees,
vehicle dispositions and/or refinancing proceeds. ABCR is the servicer, administrator and
guarantor for all lease payments that flow to the vehicle purchasers and on to AESOP as
repayments of the loans. Loan payments cover all applicable AESOP costs, which include
interest, depreciation and other administrative expenses.
AESOP will issue the class A, B and C notes on the closing date. AESOP may, without consent from
the noteholders, issue class D notes, subject to conditions, which will be subordinate to class A, B
and C notes. AESOP will also issue class R notes to AESOP Leasing L.P. to comply with risk
retention rules. Class R P&I distributions will be subordinate to class A, B and C distributions.
Credit Analysis
Diversity Classification
Loss profiles within a rental fleet ABS pool can differ based on each vehicle’s OEM, segment, age
and geographic location. Diverse pools produce consistent depreciation, resulting in better loss
performance. Nondiverse pools are exposed to greater risks, including wholesale market
weakness, recalls or other issues. Additionally, a pool with a few highly correlated and/or
financially weak OEMs may be as risky as a pool with limited vehicle diversification since brand
perception can be significantly affected by a bankruptcy event.
During benign periods, the vehicles purchased through program agreements are subject to
limited market value risk, as OEMs have agreed to repurchase the vehicles at a predetermined
price. However, they are exposed to the OEM’s financial strength and its ability to make
payments to the rental fleet company (RFC) under the agreement. While Fitch’s review of the
OEM’s health and the presence of repurchase agreements are considered in determining the
diversity of the collateral pool, no direct credit is given by Fitch in the credit analysis.
Following the review of an RFC’s fleet characteristics, Fitch categorizes the fleet as either
diverse or nondiverse. Fitch considers the following in its determination of fleet diversity:
• OEM concentration;
• composition of vehicle mix, including vehicle segment, make and model; and
• geographic concentration.
Fitch deems AESOP’s fleet as a diverse pool of assets given these factors:
• Concentration limits are in place for all OEMs to ensure the OEM, make and model mix
within the fleet remain diverse.
• Pre-pandemic, the fleet had a historically consistent mix of program and risk
concentration. As of the cutoff date, risk vehicles total 98.6% of the fleet. This shift
toward NPVs is expected to remain consistent due to lower program offerings from
OEMs as manufacturers prioritize limited vehicle supply distribution to auto dealerships
over rental car companies.
• The fleet’s vehicle mix is diverse, with more than 15 different OEMs currently
represented, as well as a wide range of vehicle models.
• The fleet is spread across the U.S. and considered diverse from a geographic perspective.
• Notably, the portion of the pool expected to consist of box trucks in the future is
expected to be nondiverse and is considered separately in Fitch’s loss analysis from the
rest of the pool. These medium- and heavy-duty trucks are expected to comprise a
Not for redistribution
Avis Budget Rental Car Funding LLC, Series 2023-3
Presale │ March 27, 2023 fitchratings.com 6
Structured Finance
Asset-Backed Securities
U.S.A.
limited number of models from a limited number of OEMs, with a minimum depreciation
rate of 1.67% per month and nondiverse disposition loss stresses.
Expected Loss Derivation
Fitch’s criteria for rental fleet ABS assume a hypothetical liquidation scenario in which the RFC
enters into Chapter 7 bankruptcy protection, despite Chapter 11 being the more likely scenario.
However, as Fitch’s objective is to delink the RFC from the ABS, Chapter 7 is assumed, triggering
a stay period that can last up to 60 days. No payments are expected to be made by the RFC to
the trust during this period.
Chapter 7 of the U.S. Bankruptcy Code generally implies there is no option for a reorganization or
restructuring, as would be the case under Chapter 11. Liquidation of the company’s assets is
therefore required to pay creditors. A bankruptcy of ABCR would trigger the early amortization of
the outstanding AESOP notes, which AESOP would ultimately pay with proceeds from the sale of
vehicles in the fleet. Fitch assumes the wholesale vehicle market is in a state of stress during the
bankruptcy scenario, leading to higher than expected depreciation and disposition losses.
A rental fleet ABS structure should have sufficient CE to withstand stressed expected losses
commensurate with the ratings during the assumed liquidation scenario. Fitch stresses the
following to derive stressed expected losses for each rating scenario applicable to the series:
• non-liened vehicle adjustment;
• bankruptcy/liquidation timing;
• casualty losses;
• depreciation;
• disposition losses; and
• interest and other expenses.
Fitch derives series-specific expected losses for the best and worst possible fleet mixes after
considering concentration limits. Fitch defines the best fleet as all program vehicles from
investment-grade (IG) OEMs, while the worst fleet would be the maximum concentration of box
trucks (5%) with the remainder consisting of NPVs (95%). This approach ensures expected
losses are covered by the series’ dynamic CE. Monthly required CE levels are derived based on
criteria from other NRSROs, as discussed further in the CE section. Fitch ultimately compares
best and worst fleet expected losses commensurate with the ratings against the best and worst
fleet required CE for each class of notes.
The derivation methodology and assumptions for all aspects of the expected losses are
consistent with Fitch criteria.
Non-Liened Vehicle Adjustment
Due to the administrative burden required to establish a first-priority-perfected security
interest in Nebraska, Ohio and Oklahoma, AESOP has historically included a “specified states”
concentration limit in each series of notes issued from the trust, sized to 7.50% of fleet net book
value (NBV). Although the likelihood is remote, there is a scenario in which, in the event of an
AESOP bankruptcy, the trustee’s liens on vehicles titled in the above-mentioned states may be
challenged and unavailable for repayment of the AESOP notes.
Recent issuances, beginning with 2021-2 (not rated by Fitch), have modified the concentration
limit that applied to the aforementioned states to a general “non-liened vehicle” concentration
limit, and the limit was increased to 10.00% of fleet NBV.
AESOP’s documentation currently prohibits any vehicles outside of the specified three states
from being included in fleet NBV if they lack a first-priority-perfected security interest. While
this revised concentration limit is not currently intended to be used for vehicles outside the
current three states, as has been the case historically, documentation may be amended in the
future to allow for such broadening of the limit.
A stress to the worst case fleet mix expected loss has been included to illustrate the impact of
adding non-liened vehicles to the fleet. This stress has been sized to 1.80%, which is removed
from the asset value available to the notes in the event of a fleet liquidation. The 1.80% level is
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Avis Budget Rental Car Funding LLC, Series 2023-3
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Structured Finance
Asset-Backed Securities
U.S.A.
derived from historical concentrations in the specified states and considers the remote
likelihood of the scenario.
This additional stress was not applied to the best case fleet mix, which assumes a variety of
characteristics of a hypothetical “best case” wherein all vehicles are from IG OEMs and are subject
to program agreements. An additional assumption of this best case fleet is a 0% concentration in the
states for which a first-priority-perfected security interest is not obtained.
An additional sensitivity has been added to show the hypothetical impact of increased vehicle
concentrations without a first-priority-perfected security interest outside of historical levels.
In this sensitivity, prior to applying the expected loss analysis, 5.0% of the asset base is removed
to stress for the potential concentration of non-liened vehicles in the fleet at the time of a
bankruptcy declaration. This analysis can be found on page 14of this report.
Bankruptcy/Liquidation Timing
Once an RFC files a Chapter 7 bankruptcy petition, Fitch assumes lease payments cease.
The leases are assumed to be immediately rejected by the bankruptcy trustee after the filing or
will be rejected by operation of law on the 16th day. Fitch assumes the servicer, backup servicer
or disposition agent, if applicable, will source and locate the vehicles to begin the liquidation
process subsequent to the lease rejection.
While the 60-day stay period is expected to be a fixed timeline, the actual vehicle and liquidation
time frame can vary, depending on market conditions and individual vehicle location.
Fitch assumes an additional 30-day delay past the 60-day stay period to allow the trustee to
gain control over the vehicles. Fitch expects that, once the trustee has access to the vehicles,
liquidation will occur within one month to three months due to the depth and efficiency of the
wholesale vehicle market witnessed over time, even during the stressed 2008–2009 period.
For this series, Fitch assumed timing stresses of six months for ‘AAAsf’, five months for ‘Asf’ and
4.3 months for ‘BBB–sf’. These timing periods are deemed stressful given the size of ABG’s fleet
relative to the used vehicle market and the experience of defi, the backup disposition agent.
Access to not only wholesale auctions, but also dealers, online auctions and retail disposition
channels, would provide defi with diverse and efficient ways to dispose of vehicles.
Furthermore, Fitch assumes no vehicles are sold until the final months of the timing stress for each
respective rating category, which is a stressful approach considering vehicles would typically be
liquidated more quickly than the original 30-day assumption, with recovery amounts flowing into the
trust within the first month following the 60-day bankruptcy stay period.
Casualty Losses
Casualty vehicles are defined as vehicles that are lost, stolen, destroyed or damaged, or vehicles
rejected by program agreements because the vehicle condition is in violation of repurchase
terms. The RFC is typically required to reimburse for these vehicles at NBV. The title is
transferred to the RFC upon payment, and any lien in favor of the trust is released. The RFC
typically has insurance in place that may cover all or most of the casualty losses on vehicles.
However, the RFC’s ability to make casualty payments after receipt of insurance is assumed to
be impeded because of the bankruptcy.
Therefore, Fitch assumes a full loss is taken. Fitch determines a casualty base case loss proxy derived
by utilizing the issuer’s historical casualty loss data to account for casualty losses. The casualty loss
amount is subtracted from the aggregate securitized fleet. ABG provided Fitch with historical
monthly casualty data for the fleet from January 2012 through September 2022.
Fitch is assuming a 1.00% casualty loss per month for each of the first three months based on
the provided data, consistent with the prior recent transactions and up 45 basis points (bps)
from transactions prior to 2022-1. The increase was a result of higher historical average fleet
casualty loss experienced driven by higher casualty losses in 2020, as well as consistently higher
casualty losses after peaks experienced in that year. Higher casualty losses were initially due to
the shift of rental businesses toward leisure travel as opposed to corporate travel, which tends
to experience more casualties overall. While previously expected to return to historical levels,
which had averaged 35bps–45bps per month, recent experience has ranged between 66bps
and 101bps.
Bankruptcy/L
iquidation Timing
Assumptions
Rating Category
Months
AAAsf
6.0
Asf 5.0
BBB–sf
4.3
Source: Fitch Ratings
Monthly Casualty Loss Assumptions
Rating Category
(%)
AAAsf 1.00
Asf 1.00
BBB–sf 1.00
Source: Fitch Ratings
Not for redistribution
Avis Budget Rental Car Funding LLC, Series 2023-3
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Structured Finance
Asset-Backed Securities
U.S.A.
The three-month period includes the 60-day bankruptcy stay period plus the additional month
to locate and secure the vehicles. No further casualty losses are anticipated during the assumed
liquidation period after the initial three months since the backup disposition agent is assumed
to have secured the vehicles. Casualty losses would total 3.00% over a three-month period in all
rating scenarios.
Depreciation
Prior to the RFC bankruptcy, market value and disposition proceeds tests are expected to help
maintain parity between the fleet’s NBV and market values. However, the RFC will no longer be
expected to fulfill these test requirements upon the occurrence of a bankruptcy.
The fleet’s vehicles will continue to depreciate during the bankruptcy/liquidation period, and
noteholders will be exposed to these losses prior to their disposal. Fitch derives depreciation
assumptions for program vehicles, risk vehicles and box trucks during the bankruptcy period
until liquidation. Separate assumptions are determined for each of these types of vehicles, as
each is purchased with different capitalized costs and different residual assumptions. Program
vehicles are purchased at a higher capitalized cost but typically incur more consistent
depreciation since residual values are the responsibility of the OEM.
Fitch received and reviewed historical depreciation from both ABG and the market to determine
base rates for the analysis. ABG provided depreciation experience segmented by program, risk and
all vehicles by model year from 2008 to 2021, as well as by truck depreciation data from 2017
through 2020. The data provided were deemed adequate for the analysis. Fitch’s base depreciation
rate assumptions are 1.45%, 1.50% and 1.67% for program vehicles, risk vehicles and trucks,
respectively, based on data provided, and are consistent with pre-pandemic levels.
According to Black Book USA, the annual depreciation rate on two- to six-year-old vehicles fell by
only 2% in 2020 and showed actual gains of over 29% in 2021 due to the global microchip shortage
resulting in supply and inventory constraints, coupled with strong new and used vehicle demand.
This was in sharp contrast to the 16.8% annual depreciation in 2019. Most of the 2019 depreciation
(a 9.9% portion of the 16.8%) occurred in 4Q19, with luxury segments seeing some of the largest
drops due to higher new vehicle incentives applying downward pressure on used vehicle values. The
strength of the new and used vehicle market followed into 2021 and 2022 and continues in 2023,
despite some recent softening in used vehicle prices coming off record levels.
Depreciation Assumptions (Worst Case Fleet Scenario)
(%)
Rating Stress
AAAsf
AA+sf
AAsf
AA–sf
A+sf
Asf
A–sf
BBB+sf
BBBsf
BBB–sf
BB+sf
BBsf
Bankruptcy/Liquidation
Timing (Months)
6.00
5.75
5.50
5.33
5.17
5.00
4.83
4.67
4.50
4.33
4.17
4.00
Expected Depreciation
Program Vehicles
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
Risk Vehicles
1.50
1.50
1.50
1.50
1.50
1.50
1.50
1.50
1.50
1.50
1.50
1.50
Box Trucks
1.67
1.67
1.67
1.67
1.67
1.67
1.67
1.67
1.67
1.67
1.67
1.67
Total Depreciation
Program Vehicles
7.99
7.67
7.35
7.14
6.92
6.71
6.49
6.28
6.06
5.84
5.62
5.41
Risk Vehicles
8.26
7.93
7.60
7.38
7.16
6.93
6.71
6.49
6.26
6.04
5.81
5.59
Box Trucks
9.15
8.79
8.43
8.18
7.94
7.69
7.45
7.20
6.95
6.70
6.45
6.21
Source: Fitch Ratings
Depreciation Assumptions (Best Case Fleet Scenario)
(%)
Rating Stress
AAAsf
AA+sf
AAsf
AA–sf
A+sf
Asf
A–sf
BBB+sf
BBBsf
BBB–sf
BB+sf
BBsf
Bankruptcy/Liquidation Timing (Months)
6.00
5.75
5.50
5.33
5.17
5.00
4.83
4.67
4.50
4.33
4.17
4.00
Expected Depreciation
Program Vehicles
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
Risk Vehicles
1.50
1.50
1.50
1.50
1.50
1.50
1.50
1.50
1.50
1.50
1.50
1.50
Not for redistribution
Avis Budget Rental Car Funding LLC, Series 2023-3
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Depreciation Assumptions (Best Case Fleet Scenario)
(%)
Box Trucks
1.67
1.67
1.67
1.67
1.67
1.67
1.67
1.67
1.67
1.67
1.67
1.67
Total Depreciation
Program Vehicles 8.14
7.81
7.49
7.27
7.05
6.83
6.61
6.39
6.17
5.95
5.73
5.50
Risk Vehicles
8.41
8.07
7.74
7.51
7.29
7.06
6.83
6.61
6.38
6.15
5.92
5.69
Box Trucks
9.32
8.95
8.58
8.33
8.08
7.83
7.58
7.33
7.08
6.83
6.57
6.32
Source: Fitch Ratings
As shown below, 2020 annual vehicle depreciation rates were far below those of historical data,
coming in at just 2.0%, according to Black Book USA (BB). Depreciation in 2021 reached
historical levels, strengthening to -28.7%, driven by the aforementioned new vehicle supply
constraints, before increasing to slightly elevated levels in 2022, estimated at 22.5%. For 2023,
BB forecasts depreciation at 18.0%.
This performance remains consistent with Fitch’s base depreciation assumptions for both
AESOP’s program and risk vehicles. Fitch did not apply any additional stresses to depreciation
assumptions.
The monthly depreciation rate is multiplied by the assumed bankruptcy/liquidation timing.
When considering the derived depreciation rates, Fitch would anticipate depreciation to be
approximately 8.5% over a six-month period at the ‘AAAsf’ level. Losses from depreciation are
multiplied by the remaining pool balance after accounting for the non-liened vehicle adjustment
and casualty losses and are applied to a declining (depreciating) collateral balance, resulting in
adjusted rates of 7.99%, 8.26% and 9.15% for program vehicles, risk vehicles and box trucks,
respectively, in the worst fleet ‘AAAsf’ stress scenario.
Disposition Loss
Vehicles are expected to be liquidated by the backup disposition agent, likely through auction houses
such as Manheim or ADESA (the Auto Dealers Exchange Services of America), historically the most
efficient for large fleet dispositions. ABCR uses additional disposition channels, including direct-to-
dealer sales, retail locations and online marketplaces for third-party retailers to help maximize
liquidity by achieving the highest recovery rate on liquidated vehicles. However, these other
channels would be unavailable in a Chapter 7 bankruptcy scenario.
Liquidation proceeds are the sole payment sources under Fitch’s bankruptcy/liquidation
scenario since ABG and ABCR are no longer able to operate and rent out vehicles to produce
additional sources of funds for the trust. Vehicles sold below their respective NBV would
translate into losses for the trust. Fitch utilizes historical loss performance data provided by the
RFC and third parties to determine potential stress scenarios for each rating category.
Wholesale vehicle market data exhibiting economic pressure, the health of automobile
manufacturers, supply and demand of both new and used vehicles, fuel prices and other factors
can severely affect used vehicle values. Therefore, wholesale vehicle values of pools exhibiting
-40
-30
-20
-10
0
10
20
30
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
(%)
Source: Black Book USA
Observed Depreciation Forecast Depreciation
Black Book Annual Vehicle Depreciation Rates
Not for redistribution
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segment diversity would tend to be less sensitive to factors affecting vehicle values versus a
pool comprising a single or limited number of vehicle types.
The worst yoy aggregate price decline observed for all vehicles over the past 11 years was used
to derive Fitch’s ‘BBsf’ expected loss stress. The stress was determined to be consistent with a
‘BBsf’ rating based on Fitch’s review of the scale of wholesale vehicle value declines for all
vehicle types (11.3% peak to trough, October 2008 versus October 2007, rounded to 12%), as
well as the magnitude of the worst loss during this period compared to other historical losses,
and then scaled upward based on standard deviations observed in the historical data.
Fitch’s ‘BBsf’ loss stress is scaled upward in 4% increments for each rating category up to
‘AAAsf’, the approximate mean standard deviation of the data, to reflect higher expected losses
under each ascending rating category. This results in expected disposition losses of 24%–28%
at the ‘AAAsf’ rating level for a diverse pool and 28%–32% for a nondiverse pool. The disposition
loss amount is calculated after accounting for expected losses from depreciation, casualty
losses and the non-lien vehicle adjustment.
Fitch’s view of the macroeconomic environment, expectations of wholesale vehicle values and
the general health of the RFC and related OEMs will determine the specific loss disposition
stress to be utilized. For example, Fitch would tend to use the upper range of the disposition
stress in times of weak macroeconomic conditions or if the RFC is of particularly weak credit
quality. Conversely, if Fitch’s view of the macroeconomic environment is positive and the RFC
is in a stronger financial position, Fitch may choose to use the lower end of the range.
Fitch
Criteria Disposition Loss Ranges
(%)
BBsf
BBBsf
Asf
AAsf
AAAsf
Nondiverse
12.0–16.0
16.0–20.0
20.0–24.0
24.0–28.0
28.0–32.0
Diverse
8.0–12.0
12.0–16.0
16.0–20.0
20.0–24.0
24.0–28.0
Source: Fitch Ratings
The rental industry recovered relatively quickly from the pandemic slowdown and the financial
health of OEMs has been strong in recent years. In addition, ABG has been profitable in recent
years and has displayed a disciplined approach in many aspects of its business and strategies,
including fleet management.
Fitch utilized the lower end of the disposition loss range for risk vehicles and box trucks in
consideration of these expectations, as shown in the table above for each rating category.
Since ABG’s vehicle fleet is deemed diverse and box trucks are deemed nondiverse, the ranges
are recommended at the low end of the range as described, from 8.0% and 12.0% at ‘BBsf’ to
24.0% and 28.0% for ‘AAAsf’, respectively, consistent with the criteria.
Monthly disposition proceeds for the fleet have consistently exceeded the NBV for sold
vehicles over the past five years, with no monthly losses relative to NBV in any month.
Disposition proceeds have generally ranged from 101% to 164% of NBV since 2010.
The monthly market value tests and minimum depreciation applied to vehicles in the fleet
enable ABCR to keep NBVs in parity with ongoing market values, resulting in low disposition
losses historically and mostly gains recorded to date.
For program vehicles, Fitch looked at annual disposition data provided by ABCR by model year,
which have shown minimal losses relative to NBV since the majority of vehicles returned to
OEMs have been within terms of the program agreements. Fitch assumed 0.50% for ‘BBsf’
program disposition losses, well above annual losses observed. This assumption is increased for
each rating scenario, up to 5.00% for ‘AAAsf’.
Fitch analyzed the number of vehicles in ABG’s total fleet relative to the one-year- to two-year-
old used vehicle market, which is expected to be about 15 million vehicles at any given time, to
determine fleet size relative to the applicable wholesale market. The estimated fleet accounts
for a small percentage of used sales in any given year, ranging from 1.5% to 2.5% of the market.
Therefore, Fitch believes the market could adequately absorb the fleet in a liquidation scenario
when considering the fleet size relative to the market, in addition to the diversity of the fleet
from a make/model perspective. Additionally, defi provides reports on the fleet and disposition
202
3-3 Expected Loss
Assumptions
(%)
Best Fleet
Worst Fleet
AAAsf
18.87
36.96
AA+sf
17.92
34.85
AAsf 16.97 32.72
AA–sf
16.33
31.29
A+sf
15.69
29.85
Asf 15.05 28.41
A–sf
14.41
26.97
BBB+sf
13.76
25.51
BBBsf
13.11
24.05
BBB–sf
12.46
22.58
BB+sf
11.81
21.11
BBsf
11.16
19.63
Source: Fitch Ratings
Not for redistribution
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strategies in the event of a bankruptcy/liquidation scenario on an ongoing basis to ABG and
ABCR. As such, no further asset liquidity stresses are recommended.
Interest and Other Expenses
Interest and administrative costs are still payable on the notes during the bankruptcy/liquidation
period. Therefore, Fitch’s analysis accounts for these expenses by including them in the expected
loss assumptions. Depending on the note rating, sufficient liquidity in the form of a cash reserve or
an LOC would be expected to cover anticipated interest expenses/funding costs, servicing fees
and any other administrative expenses, up to their maximum allowed amounts, over the assumed
liquidation period.
The expected weighted average (WA) bond coupon is 6.76% per annum as a percentage of the
notes. The total interest cost as a percentage of the series receivable amount can fluctuate
based on the fleet mix, ranging from 6.22% for the best fleet to 5.48% for the worst fleet.
Aggregate servicing and other costs per annum are 0.33% of the current series receivables
amount but can fluctuate according to fleet mix since certain costs are tied to the size of the
fleet and the series balance. Expenses decrease while the required enhancement increases
when the fleet shifts toward the worst fleet mix, as the receivables pool must increase so that
CE reaches required levels. The required LOC amount for 2023-3 is expected to total 4.00% of
the notes.
Summary — Total Expected Loss Proxy
Fitch calculates total expected losses for each rating scenario by summing the following four
components over the assumed liquidation period:
• casualty losses;
• depreciation losses;
• disposition losses; and
• interest expenses and other fees.
Fitch then compares the total expected losses for each rating scenario to the amount of
required CE for each class of notes in the series to determine if expected losses are covered by
the available CE levels at all rating categories.
Note that the depreciation amount is calculated on a declining (depreciating) balance after taking
into account the non-liened vehicle adjustment, if any, and casualty losses. The disposition loss
amount is calculated after accounting for the non-liened vehicle adjustment, expected
depreciation loss and casualty loss.
Best and worst fleet expected losses commensurate with the ratings for each of the notes are
shown above in comparison to the best and worst fleet required CE for each class. Under the
‘AAAsf’ scenario, Fitch expects losses ranging from 18.87% to 36.96% for 2023-3, while
required CE for class A notes ranges from 31.49% to 40.27%, in excess of expected losses.
Best and worst fleet CE for class B notes are in excess of best and worst fleet expected losses;
the worst fleet CE of class C notes are in excess of worst fleet expected losses and the best fleet
CE for class C notes are within 74bps of best fleet expected losses. The shortfall for class C
under the best fleet CE is deemed to be acceptable due to the unlikely event that all vehicles in
the fleet would be program vehicles given the ongoing vehicle supply and demand imbalances
resulting in nearly 100% in NPVs recently.
Disposition Assumptions
(%) Program
Risk
Truck
AAAsf
5.00
24.00
28.00
AA+sf
4.44
22.00
26.00
AAsf
3.88
20.00
24.00
AA–sf
3.50
18.67
22.67
A+sf
3.13
17.33
21.33
Asf
2.75
16.00
20.00
A–sf
2.38
14.67
18.67
BBB+sf
2.00
13.33
17.33
BBBsf
1.63
12.00
16.00
BBB–sf
1.25
10.67
14.67
BB+sf
0.88
9.33
13.33
BBsf
0.50
8.00
12.00
Source: Fitch Ratings
Expected Losses v
ersus Credit Enhancement
(%)
Best Fleet Mix
Worst Fleet Mix
Class
Expected Losses
Required CE
Expected Losses
Required CE
Ratings
A
18.87
31.49
36.96
40.27
AAAsf
B 15.05
20.46
28.41
30.64
Asf
C
12.46
11.72
22.58
23.03
BBB–sf
Source: Fitch Ratings
Not for redistribution
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An example of a single vehicle for 2023-3, as illustrated in the table to the right, demonstrates
the impact of the six-month depreciation and disposition stresses on vehicle value for a single-
risk vehicle when considering Fitch’s stresses. Effectively, a $30,000 vehicle would experience
a 33.88% loss in this scenario.
Legal Structure
Fitch believes the AESOP legal structure provides that a bankruptcy of ABG or ABCR would not
impair the timeliness of payments on the securities. Fitch expects to receive and review legal
opinions to the effect that the AESOP assets would not be consolidated with those of ABG or
ABCR in the event of bankruptcy. Furthermore, Fitch expects to receive an opinion that the
trustee has a first-priority-perfected security interest in the vehicles leased by the vehicle
purchasers to ABCR, Avis and Budget, as well as the other sublessees.
AESOP is structured with a single operating lease under which all vehicles in the trust fall.
This master lease is considered indivisible and a singular obligation upon which ABCR and its
sublessees make monthly rental payments. The recent bankruptcy of The Hertz Corporation
saw a legal challenge of this structure in court in an attempt to segment out a portion of the
vehicles Hertz intended to liquidate. Ultimately, the motion on this issue was not heard by the
court and postponed indefinitely. However, ABCR has made clear in its documentation that the
AESOP operating lease is considered indivisible, and while it may be challenged by debtors in
bankruptcy court, that is not the intent of the structure as created, and Fitch shares this opinion
in all respects.
Asset Analysis
AESOP Fleet Mix
(As of Dec. 31, 2022)
Total Fleet OEM Concentrations
OEM
Fitch Rating
% of Fleet NBV
Toyota A+, Rating Outlook Stable 19.88
Ford
BB+, Rating Outlook Positive
14.27
Chrysler
a
BBB, Rating Outlook Stable 19.96
GM
BBB–, Rating Outlook Positive
15.64
Kia BBB+, Rating Outlook Stable 7.18
Honda
A, Rating Outlook Stable
5.85
Nissan Rating Withdrawn 5.53
Hyundai
BBB+, Rating Outlook Stable
4.05
Mitsubishi NR 1.21
Mazda
NR
1.57
Volkswagen A–, Rating Outlook Stable 1.08
Subaru
NR
1.07
Mercedes + Smart A–, Rating Outlook Stable 0.54
Other
N.A.
1.97
BMW NR 0.13
Volvo
A–, Rating Outlook Stable
0.08
Total
—
100.00
a
Rating of parent, Stellantis N.V. N.A. – Not applicable. NR – Not rated.
Source: Avis Budget Car Rental, LLC
OEM Concentrations — Diverse
The fleet as of the cutoff date is summarized in the table below by program/risk and OEM.
Chrysler replaced Toyota to be the largest OEM at 20.0% of the fleet, while Toyota and GM are
the second and third largest OEMs with 19.9% and 15.6% of the fleet’s NBV, respectively.
The concentration of the top five OEMs as a percentage of the total pool has steadily decreased
since 2005, from a fleet average of 97.4% to 76.9% through December 2022. Fitch views this
trend positively, as a less concentrated pool provides more diversification. Notably, the
concentration of GM in the fleet has decreased considerably. In 2005, GM averaged 57.6% of
AAAsf Scenario
—
Risk Vehicle Example
Initial NBV ($)
a
30,000
Lien Holiday (%)
b
1.80
Adjusted NBV After
Removal of Non-Lien
Vehicles ($) c = a * (1 – b)
29,460
Casualties (%)
d
3.00
NBV Less
Casualty Loss ($)
e = c * (1 – d)
28.576
Timing (Months)
f
6
Monthly
Depreciation (%)
g
1.50
Total
Depreciation (%)
h = (1- (1 - g)^f)
8.67
Subtotal ($)
i = e * (1 – h)
26,099
Disposition Loss (%)
j
24.00
Ending NBV ($)
k = i * (1 – j)
19,835
Total Loss ($)
l = a – k
10,165
Total Loss (%)
m = l / a
33.88
Source: Fitch Ratings
Not for redistribution
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the fleet and represented the top OEM concentration. By contrast, GM is currently the third
largest OEM; it comprises 15.6% of the fleet, as of the cutoff date.
As of the cutoff date, 79.7% of the current pool consist of vehicles manufactured by IG OEMs,
with the remaining 20.3% from non-IG OEMs. Ford is currently the pool’s largest non-IG OEM.
AESOP Fleet Mix
(As of Dec. 31, 2022)
Program — Non-Program OEM Concentrations
OEM
% of Fleet
% of Program
Program
Kia 1.00
70.26
GM
0.42
29.72
Total
1.42
100.00
Non-Program
Toyota
19.88
20.16
Ford
14.27
14.48
Chrysler
19.96
20.25
GM
15.22
15.44
Kia
6.18
6.27
Honda 5.85
5.94
Nissan
5.53
5.61
Hyundai
4.05
4.11
Other
1.97
2.00
Mazda
1.57
1.59
Mitsubishi
1.21
1.23
Volkswagen 1.08
1.10
Subaru
1.07
1.08
Mercedes + Smart
0.54
0.55
BMW
0.13
0.13
Volvo
0.08
0.08
Total
98.58
100.00
a
Rating of parent, Stellantis N.V. N.A. – Not applicable. NR – Not rated.
Source: Avis Budget Car Rental, LLC
Program/Non-Program Vehicle (Risk) Mix — Weakening
The program/risk vehicle mix has shifted significantly at times but has trended toward risk
vehicles in recent years, per the chart below. Program concentrations first dipped below 50% in
November 2007, and prior to the pandemic, they fluctuated in line with seasonal trends. As of
the cutoff date, the fleet consists of mainly NPVs, at 98.58% of the fleet, while program vehicles
represent only 1.42%, compared with 15.15% as of March 2021. The following chart shows
monthly concentrations for program and risk vehicles since 2005.
Prior to the pandemic, the program/risk vehicle mix shifted according to seasonal trends, with
the program typically declining in the early winter months before increasing in the spring and
summer months. Since mid-2015, program concentrations have been below typical levels,
0
20
40
60
80
100
12/05
6/06
12/06
6/07
12/07
6/08
12/08
6/09
12/09
6/10
12/10
6/11
12/11
6/12
12/12
6/13
12/13
6/14
12/14
6/15
12/15
6/16
12/16
6/17
12/17
6/18
12/18
6/19
12/19
6/20
12/20
6/21
12/21
6/22
12/22
(%)
Historical Program vs. Risk Concentrations
Program Risk
Source: Avis Budget Car Rental, LLC
Not for redistribution
Avis Budget Rental Car Funding LLC, Series 2023-3
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Structured Finance
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largely due to declining OEM offerings. Kia now represents the only significant program
concentration at 1.00% of the fleet and 70.26% of total program vehicles, while GM accounts
for 0.42% and 29.72%, respectively.
ABCR’s fleet management team adjusts the mix to best fit the needs of their fleet and consumer
demand while also assessing ongoing program offerings from the OEMs. Program offerings
have continued to decrease in recent years, with additional pandemic-related factors adding to
this shift from historical levels. OEMs are hesitant to shoulder the risk of additional program
agreements’ residual values, and ABCR and other rental car companies returned many of their
pre-pandemic program vehicles during initial de-fleeting in 2020.
Fitch expects the mix to continue to fluctuate along with seasonal and market trends.
Program levels should remain low in the near term due to the low amount of vehicle supply in the
market and the limited amount of offerings to the rental car companies that have been observed.
Notably, as of the December 2022 cutoff date, used vehicles comprised 18.4% of AESOP’s total
fleet NBV. This is a marked increase from historical levels due to the continued supply
constraints for new vehicle production. As previously discussed, the 25% series-level
concentration limit was removed starting with the 2022-5 transaction.
Vehicle Models — Diverse
The top 20 models in the fleet as of December 2022 are diverse, represented by seven different
OEMs, with a balanced mix between light-duty trucks, cars and vans. These top models
represent 49.7% of the fleet, slightly down from 2023-1 and 2023-2, and 2022-3, 2022-4 and
2022-5, but similar to levels seen in 2020 and before. Of the top 20 models, 37.9% are cars;
light-duty trucks, sport-utility vehicles (SUVs) and crossover utility vehicles (CUVs) account for
51.0%; and vans make up the remaining 11.1%, compared with 32.8%, 56.6% and 10.6% in both
2023-1 and 2023-2, respectively.
Light-duty trucks have grown as a concentration within the fleet from 2017 to 2022, although
the concentration of cars recently took some shares of the fleet due to customer demand. Fitch
expects light-duty truck concentration in the fleet to remain elevated for the foreseeable
future.
Geographic Concentration — Diverse
As of the December 2022 cutoff date, the top five states represent approximately 60.3% of the
fleet, marginally up from 2023-1 and 2023-2, and slightly above prior transactions. Florida has
the top state concentration with approximately 34.1% of the fleet, with California (12.8%), New
York (4.6%), Texas (4.5%) and Colorado (4.2%) rounding out the top five.
As mentioned previously, certain specified states (Nebraska, Oklahoma and Ohio) have
historically been constrained to 7.5% of fleet NBV due to the lack of first-priority-perfected
security interests for vehicle titles in these states. Historical concentrations have remained
below this historical limit, comprising less than 4% of the fleet in recent years.
Aging — Increasing
Aging within the fleet remained consistently cyclical for the four years prior to the onset of the
pandemic. However, as new vehicle supply and demand dried up in the early days of the
pandemic, vehicle age began to increase in the overall AESOP fleet, even as it liquidated fleets
to match decreased demand. The current trailing three-month average fleet age is 12.84
months as of the December 2022 collection period, at the high end of the range since January
2020 (9.0 months–12.8 months). This average age is higher compared to early 2020 and prior,
attributable to the impact of the pandemic, and aging remains elevated, with delays in new
vehicle deliveries, due in part to the ongoing global semiconductor chip shortage, leading to
longer fleet vehicle retention.
Notably, this aging pattern is due to ABCR’s intentional fleet management. Vehicles that
previously would have been sold from the fleet earlier in their lives are now retained and used for
longer durations and strategically moved from Avis’ higher-quality rental brands to lower
economy options, right down to vehicles used for rideshare partnerships and Zipcar rentals, until
eventually, such vehicles are sold at Avis’ retail network, at auction or in the secondary market.
Light
Truck
50.6%
Car
38.2%
Van
11.2%
Source: Avis Budget Car Rental, LLC
AESOP Top 20 Models —
Segment Concentration
Not for redistribution
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Risk vehicles are held longer than program vehicles to take advantage of the depreciation curve
for dispositions. With the risk vehicle concentration in the fleet higher within the past two years,
aging has trended higher.
Expected Rating Sensitivity
Series 2023-3 - Rating Sensitivity
Class A
Class B
Class C
Original Rating
AAAsf
Asf
BBB-sf
Liquidation Timing
AAAsf
A-sf
BB-sf
Disposition AA+sf A-sf BB-sf
Combined AAsf BBB-sf Bsf
Non-Liened Vehicles
AAAsf
A-sf
BBsf
Source: Fitch Ratings
Rating Sensitivity
Liquidation Timing Stress
Fitch’s rating sensitivity analysis focuses on two scenarios involving potentially extreme market
disruptions that would force the agency to redefine its stress assumptions. The first scenario
examines the effect of moving Fitch’s bankruptcy/liquidation timing scenario to eight months
at ‘AAAsf’ with subsequent increases to each rating level.
Bankruptcy/Liquidation Timing Stress Sensitivity
(%)
Worst Fleet Mix
Best Fleet Mix
Sensitivity
Recommended
Ratings
Class
Current
Ratings
Expected
Loss
Proposed
CE
Expected
Loss
Proposed
CE
A
AAAsf
39.89
40.27
22.40
31.49
AAAsf
B
Asf
31.59
30.64
18.67
20.46
A-sf
C
BBB–sf
25.92
23.03
16.15
11.72
BB-sf
Source: Fitch Ratings
Disposition Proceeds Stress
The second scenario considers the effect of moving the disposition stresses to the higher end of
the range at each rating level for a diverse fleet for NPVs in the fleet and to the higher end of
the range for a nondiverse fleet for trucks in the fleet. For example, the ‘AAAsf’ stress levels
would move to 28% from 24% and to 32% from 28% for NPVs and trucks, respectively.
Disposition Proceeds Stress Sensitivity
(%)
Worst Fleet Mix
Best Fleet Mix
Sensitivity
Recommended
Ratings
Class
Current
Ratings
Expected
Loss
Proposed
CE
Expected
Loss
Proposed
CE
A AAAsf 40.44
40.27
18.87
31.49
AA+sf
B
Asf
31.94
30.64
15.05
20.46
A-sf
C
BBB–sf
26.15
23.03
12.46
11.72
BB–sf
Source: Fitch Ratings
Combined Stress
Finally, the last example shows the impact of both stresses on the structure. The purpose of
these stresses is to demonstrate the potential rating impact on a transaction if one or a
combination of these scenarios were to occur.
The Rating Sensitivity section provides
insight into the model
-implied
sensitivities the transaction faces when
one assumption is stressed while holding
others equal. The
modeling
process uses
the estimation and stress of these
variables to reflect asset performance in
a stressed environment. The results to
the left should only be considered as one
potential outcome, as the transaction is
exposed to multiple dynamic risk
factors. They should not be used as
indicators of possible future
performance.
No change or positive change
Negative change within same category
– 1 category change
– 2 category change
– 3 or larger category change
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Structured Finance
Asset-Backed Securities
U.S.A.
Combined Stress
Sensitivity
(%)
Worst Fleet Mix
Best Fleet Mix
Sensitivity
Recommended
Ratings
Class
Current
Ratings
Expected
Loss
Proposed
CE
Expected
Loss
Proposed
CE
A
AAAsf
43.27
40.27
22.40
31.49
AAsf
B
Asf
35.01
30.64
18.67
20.46
BBB–sf
C
BBB–sf
29.38
23.03
16.15
11.72
Bsf
Source: Fitch Ratings
With a sufficient increase in either the timing of the liquidation of the fleet or disposition fees,
the class A notes could still be maintained at ‘AAAsf’. To approach non-investment-grade rating
levels or a ‘CCCsf’ rating, in addition to the combined scenario described above, depreciation
costs would need to rise to previously unseen levels for the platform, increasing to, at minimum,
two times the highest monthly depreciation levels seen for both program vehicles and NPVs at
the height of the recession.
Non-Liened Vehicle Concentration
In the event of an amendment to the base documents, the AESOP trust may be allowed to contain
a certain portion of non-liened vehicles that do not give the trustee a first-priority-perfected
security interest, and may not be available in the event of a bankruptcy of the owner of the vehicles
and early amortization of the notes. Although the likelihood of this scenario is deemed extremely
remote, to account for such a change, Fitch ran a sensitivity expected loss analysis assuming 5.00%
of the asset base becomes unavailable in the event of a bankruptcy in both the best and worst case
fleets, with the potential impact on ratings illustrated in the following table.
Non
-Liened Vehicle Sensitivity
(%)
Worst Fleet Mix
Best Fleet Mix
Sensitivity
Recommended
Ratings
Class
Current
Ratings
Expected
Loss
Proposed
CE
Expected
Loss
Proposed
CE
A
AAAsf
39.11
40.27
23.09
31.49
AAAsf
B
Asf
30.82
30.64
19.44
20.46
A–sf
C
BBB–sf
25.17
23.03
16.96
11.72
BBsf
Source: Fitch Ratings
Up Sensitivity
Overall improvement in the secondary market or lower than expected depreciation versus
historical levels may lead to positive migrations in the ratings for the transaction. However,
there is limited upgrade potential for rated rental fleet ABS notes given the revolving nature of
the structure, whereby collateral changes on a daily basis through fleet purchases and
dispositions, as well as trust concentration limits in place. Therefore, the occurrence of
upgrades is very limited at best. Additionally, fleet composition changes each day, including the
concentration of program vehicles versus NPVs (or risk vehicles), as well as OEM
brand/segment/model concentrations. Potential positive rating actions are also limited by the
current macroeconomic environment.
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Structured Finance
Asset-Backed Securities
U.S.A.
Transaction Structure
Credit Enhancement
CE for each series is dynamic based on the aforementioned methodology. CE may be in the form
of subordination, OC, LOCs and/or cash reserves subject to a required liquidity amount sized to
cover at least six months of interest on the notes plus 50bps.
The fleet is categorized into different risk buckets according to the Issuer Default Ratings (IDRs)
of the vehicle OEMs for vehicles and program/risk status. IDRs are determined from non-Fitch
NRSROs. Minimum required CE for the most subordinate notes is determined based on the fleet
characteristics according to the above criteria, with varying levels of enhancement required for
each category of vehicle from Moody’s. The WA CE level will be utilized as the minimum
required CE level each month for the most subordinate notes.
The table above summarizes AESOP maximum and minimum CE levels for each series since
2017-1. For transactions pre 2022-5, the worst fleet mix, per Fitch’s methodology, occurs when
the fleet mix would change immediately to 85% risk vehicles (given the 85% limit on NPV), 5%
box trucks and 10% program vehicles from non-IG OEMs. No credit was given for the additional
CE step-up for exceeding the NPV concentration, as it was assumed this would not be available
in the event of a bankruptcy. For series 2023-3, the worst fleet mix is 95% risk vehicles and 5%
box trucks, which reflects the removal of the NPV limit for this series and the additional
permanent CE provided. The best fleet mix would be 100% program vehicles from IG OEMs.
Required CE levels and advance rates for this series are listed in the table below. AESOP will be
required to maintain assets equal to an NBV equal to the aggregate asset coverage threshold
amount for the series, determined by the required advance rate for each series. Failure to do so
will result in an amortization event. Each vehicle’s NBV for the purpose of this calculation will
be equal to the capitalized cost less aggregate depreciation charges and, in the case of risk
vehicles, the amount of any upfront incentive fees paid by the OEM.
AESOP Credit Enhancement
(%) 2023-3
2023-2
2023-1
2022-5
2022-4
2022-3
2022-1
2021-1
2020-
2
(NR)
2020-1
2019-3
2019-2
2018-2
2018-1
2017-2
2017-1
Tenor
(Years)
3.7
3
5
3
5
3
5
5
5
5
5
5
5
5
5
5
LOC Size
(% of Notes)
4.00
3.75
4.00
4.00
3.50
3.50
2.75
2.00
2.00
2.00
2.00
2.25
2.75
2.50
2.25
2.25
Best Fleet
Class A
31.49
31.36
31.49
31.43
33.41
33.35
32.27
30.92
26.41
27.40
27.40
27.47
28.12
28.38
28.31
30.70
Class B
20.46
20.34
20.46
20.39
23.66
23.58
22.98
22.22
18.83
18.83
18.83
18.78
19.27
19.37
19.33
20.27
Class C
11.72
11.62
11.72
11.64
17.32
17.24
16.63
16.43
11.51
11.51
11.51
11.54
11.79
12.16
12.13
13.11
Class D
N.A.
N.A.
N.A.
N.A.
5.61
5.52
4.89
4.83
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
Worst Fleet
Class A
40.27
40.14
40.27
40.22
38.64
38.59
37.60
35.29
33.99
35.60
35.60
35.67
36.22
35.89
36.07
38.49
Class B
30.64
30.53
30.64
30.59
29.65
29.59
29.04
27.14
27.19
27.99
27.99
27.97
28.37
27.82
28.06
29.23
Class C
23.03
22.92
23.03
22.97
23.81
23.74
23.19
21.71
20.63
21.51
21.51
21.55
21.73
21.37
21.64
22.88
Class D
N.A.
N.A.
N.A.
N.A.
13.02
12.94
12.38
10.85
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A. – Not applicable. NR – Not rated.
Source: AESOP 2023-3
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Structured Finance
Asset-Backed Securities
U.S.A.
Required Advance Rates and Credit Enhancement Levels
Vehicle Type
IG versus Non-IG
Moody’s Required CE (%)
Program
IG
12.75
Program
Non-IG
16.25
Risk
IG
28.35
Risk
Non-IG
28.35
Trucks
All
35.75
Source: Avis Budget Car Rental, LLC
The 2023-3 class A required CE are 40.27% for the worst fleet mix and 31.49% for the best fleet
mix. The required CE will, at all times, be within the maximum and minimum levels as both
AESOP’s collateral mix and OEM ratings shift. Monthly CE may be in excess of the required
amounts when considering amounts available in AESOP’s principal collection account.
Overcollateralization
OC is provided by the excess receivables when considering the assets over the outstanding note
principal balance. After closing and on each distribution date, the OC level will also include any
amounts deposited into the principal collection account. For the purposes of this analysis, the
class R notes are considered part of OC.
Historically, required AESOP series CE levels were calculated based on the total senior invested
amount for each series, which includes the series’ pro-rata share of cash and permitted
investments held in a collection account. However, for these series and future issuance, AESOP
will now use a net senior invested amount for the calculation of the enhancement amount; this
will net out these liquid assets since they do not require additional enhancement, in contrast to
trust vehicles that do. This net debt concept does not affect the level of actual enhancement
available to each series.
Letters of Credit
Liquidity is provided in the form of a cash reserve and/or an LOC expected to be sized to 4.00% of the
notes, equal to six months of interest plus a cushion of 0.50%. An amortization event will occur with
respect to the notes if the liquidity amount falls below the required amounts and such deficiency
continues for at least two business days. The LOC provider is expected to initially be JPMorgan
Chase Bank, N.A. (AA/F1+, Stable), which conforms to Fitch’s counterparty criteria for direct support
counterparties.
Should the LOC provider be downgraded below Fitch’s required rating thresholds, the
administrator must notify the trustee to draw on the LOC in an amount equal to a potential
enhancement deficiency should the transaction lose the LOC, up to the full size of the LOC and
deposit that amount in the cash collateral amount. Should the LOC provider go bankrupt or
refuse to honor a proper draw on the LOC, this will trigger a limited liquidation event where
fleet assets will be sold to pay off the principal of any series they provide the LOC for. It is
important to note that this provision can be waived with noteholder consent.
Notably, AESOP includes a multiseries LOC that will cover the required minimum liquidity
amount for multiple series of notes, beginning with 2021-1, and increase in size as new series
are issued. These LOCs are irrevocable and repayment thereof is an obligation of ABCR and not
AESOP. The change is expected to alleviate the administrative burden of managing multiple
LOCs for multiple outstanding series.
Subordination
Class A and B notes benefit from subordination of notes junior to each in the capital structure.
AESOP has the option of issuing additional class D and R notes in the future, which will be
subordinated to class A, B and C notes.
Market Value and Disposition Proceeds Tests
AESOP also includes additional dynamic CE for risk vehicles based on results of the market
value and disposition proceeds tests, which will provide additional CE if breached. The required
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Structured Finance
Asset-Backed Securities
U.S.A.
CE amount will increase if and to the extent risk vehicle disposition proceeds during any
measurement month fall below the NBV thereof, or if risk vehicle market values fall below the
risk vehicle NBV.
The MTM test will not include:
• Risk vehicles manufactured by an OEM that has defaulted on its program repurchase
agreement within the first three months after the earlier of the OEM bankruptcy or the
re-designation.
• Risk vehicles subject to an OEM program with an eligible risk OEM with respect to which
no event of default has occurred and is continuing and, therefore, any difference
between the market values and NBVs of these vehicles will not result in an increase in
the series required enhancement amount.
Regarding the first clause, required CE will increase if the market value of program vehicles
manufactured by the OEM, which have not been re-designated, falls below the NBV but at a
slight discount of 96.5%. Any vehicles not re-designated within 90 days following the
bankruptcy event will be treated as risk vehicles for the purpose of the test.
If either test is breached, the applicable breach margin is required to be added to each
outstanding series’ CE. The maximum breach margin will remain as required CE for three
months in the case of an MTM test breach and 12 months in the event of a disposition proceeds
test breach. The breach will be cured if there are no further breaches within a three-month
period and a 12-month period.
Previously, the breach of either test led to a 12-month addition of the maximum breach margin,
with the shift made in the 2021-1 transaction. This test has not been breached in the past
10 years.
Trust Structure
AESOP is a master trust with 18 series outstanding as of the December 2022 distribution date.
AESOP noteholders share a pro-rata security interest in the pool of vehicles leased out by the
vehicle purchasers to ABCR and the sublessees. All series have a revolving period followed by a
six-month controlled amortization period.
The revolving period begins on the closing date and ends upon the commencement of each
series’ controlled amortization period or earlier in the event of the occurrence of a rapid
amortization event or an event of bankruptcy. No principal will be paid to investors or
accumulated during the revolving period. Principal will be treated as shared collections and
made available for required principal distributions and deposits for other series and/or to
purchase vehicles.
The series’ controlled amortization will commence upon the close of business, on August 2026
for 2023-3, and end on the earlier of the date on which the series is fully paid, which is expected
to be the February 2027 distribution date, and the commencement of the rapid amortization
period. During this period, the notes will be paid down by the controlled amortization amount
in each period, equal to one sixth of the note balance for each class plus any shortfalls in
payments from previous distribution periods. If the notes are not paid in full by the expected
maturity date, the notes will enter rapid amortization. Legal final maturity is one year after the
expected maturity date of February 2028.
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Structured Finance
Asset-Backed Securities
U.S.A.
The following table shows all outstanding AESOP term ABS notes and variable funding notes
(VFNs) as of Mar. 16, 2023.
AESOP Outstanding Series
a b
Series
Aggregate Invested
Amount ($)
Expected Maturity/
Termination Date Type
2010-6
1,903,875,702
April 2024
VFN
2011-4
193,000,000
March 2023
VFN
2015-3
182,124,297
April 2024
VFN
2017-2
125,916,667
March 2023
Term 144A
2018-1
480,000,000
September 2023
Term 144A
2018-2
681,500,000
March 2024
Term 144A
2019-2
796,500,000
September 2024
Term 144A
2019-3
777,550,000
March 2025
Term 144A
2020-1
847,250,000
August 2025
Term 144A
2020-2
685,750,000
February 2026
Term 144A
2021-1
844,000,000
August 2026
Term 144A
2021-2
685,750,000
February 2027
Term 144A
2022-1
791,250,000
August 2028
Term 144A
2022-3
474,750,000
February 2026
Term 144A
2022-4
448,400,000
February 2028
Term 144A
2022-5
583,400,000
April 2026
Term 144A
2023-1
582,890,000
April 2028
Term 144A
2023-2
408,040,000
October 2026
Term 144A
Total Outstanding
11,491,946,667
a
As of Mar. 16, 2023 distribution date.
b
Outstanding term 144A note balances include class R notes retained to satisfy
risk retention requirements where applicable.
Source: Avis Budget Car Rental, LLC
Concentration Limits
AESOP Concentration Limits
Limit %
Kia
55.00
Mitsubishi
10.00
Isuzu
10.00
Subaru
12.50
Hyundai
55.00
Suzuki
10.00
Tesla
25.00
Jaguar
12.50
Land Rover
12.50
Trucks
5.00
Vehicles Without a Lien
10.00
Non-Eligible Manufacturers
10.00
Source: Avis Budget Car Rental, LLC
AESOP’s concentration limits are listed in the table above. Three changes have been introduced
beginning with the 2022-5 transaction, which include the removal of the used vehicle and NPV
concentration limits and the increase to the OEM concentration limit for Tesla to 25% from
15%, which can be increased beyond 25%, subject to a rating agency condition.
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Structured Finance
Asset-Backed Securities
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The remaining limits are consistent with the Fitch-rated transactions since 2022-1; however,
compared to the series 2021-1 transaction, the series-specific limits were added to cover
medium- and heavy-duty trucks, vehicles without a lien and three additional OEMs — Tesla,
Jaguar and Land Rover — while the historical specific state limits for Ohio, Oklahoma and
Nebraska were removed.
The prior changes to OEM concentration limits were included to allow for a greater degree of
flexibility in the composition of the fleet, with any non-eligible manufacturer able to be added
to the list of eligible manufacturers with a 10.00% limit, subject to a rating agency condition.
Additionally, existing OEM concentration limits may now increase up to 10%, likewise subject
to a rating agency condition.
The addition of the truck limit is intended to, in the future, allow Avis to include these vehicles
in the fleet. Avis has historically managed a fleet of approximately 20,000 trucks through its
Centerpoint Financing facility and is seeking to add additional flexibility to the AESOP platform.
These trucks will be treated separately for the purposes of CE and depreciation, with a required
level of 35.75% CE and a minimum depreciation rate schedule that consists of 1.67% for the first
24 months of the vehicle’s life and 0.75% thereafter.
The removal of the certain states concentration was made in tandem with the addition of the
vehicles without a lien concentration limit. Historically, Avis has found it administratively
burdensome in Ohio, Oklahoma and Nebraska to assign a lien to a third-party vendor due to the
laws in those states, in particular the indenture trustee. This leads to the security interest in the
vehicles in these states as existing but not perfected in the case of the indenture trustee.
As such, this limit has been in place historically to allow for AESOP vehicles in these states to be
included as part of the operating lease. As part of efforts to modernize the platform, Avis has
elected to broaden the definition of this concentration limit to apply to non-liened vehicles,
regardless of state. Notably, the base indenture for the AESOP platform currently does not allow
for any non-liened vehicles from any state other than Ohio, Oklahoma and Nebraska to be added
to the fleet. Any change to this requirement would be subject to a rating agency condition.
Concentrations in excess of the above-defined limits require that additional enhancement be
allocated to the transaction; otherwise, the notes will enter into early amortization.
Minimum Depreciation Levels
Program depreciation rates are established through OEM programs and are sized to result in an
NBV equal to the vehicle’s expected market value at the time they are returned to the OEMs.
Risk vehicle depreciation is variable depending on the market value of individual vehicles
relative to the NBV of that vehicle. If the ratio of these two values is less than 105%, the required
minimum depreciation rate is 1.67%. However, if market values begin to greatly exceed the
NBVs of vehicles, this minimum depreciation rate will step down to prevent severe
undervaluation of the vehicles. If the ratio of market value to NBV is between 105% and 110%,
the minimum depreciation rate steps down to 1.00% and further to 0.50% if the ratio exceeds
110%. This is a change from historical transactions in which minimum depreciation was set at
either 1.67% or variable based on the age of the vehicles.
Trucks, which are expected to be added to the fleet in the coming years, will have an established
age-based schedule of minimum depreciation. Trucks aged between zero months and
24 months will depreciate at 1.67% per month, whereas older trucks will depreciate at a
minimum of 0.75% thereafter.
Priority of Payments
The payment waterfall for each month will vary by the period the series is in, whether it is the
revolving period, the controlled amortization period, a rapid amortization period or after the
occurrence of an event of ABCR bankruptcy, either at ABCR or involving any other lessee or
sublessee. The administrator will direct the trustee to allocate all amounts deposited into the
collection account depending on the period as described below.
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Structured Finance
Asset-Backed Securities
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During Revolving Period
• To the series collection account, allocable interest collections, which will be further
allocated to the series accrued interest account.
• To the series excess collection account, allocable principal collections.
During Controlled Amortization Period
• To the series collection account, allocable interest collections, which will be further
allocated to the series accrued interest account.
• To the series collection account, allocable principal collections, which will be used to
make controlled principal payments to each of the notes in sequential order; provided,
however, that if allocable principal exceeds the sum of controlled principal payments,
such excess will be allocated to the series excess collection account.
During Rapid Amortization Period
• To the series collection account, allocable interest collections, which will be further
allocated to the series accrued interest account.
• To the series collection account, allocable principal collections, which will be used to
make sequential principal payments to each class of notes until each is paid in full;
provided, however, that if ABCR determines:
- allocable interest collections and other available amounts will be insufficient to
pay due and unpaid monthly interest;
- series available enhancement is greater than zero; and
- then ABCR will reallocate a portion of allocable principal collections to the series
accrued interest account to be treated as interest collections.
After Occurrence of Bankruptcy Event
• To the series collection account, the AESOP I operating lease allocable interest
collections, which will be deposited in the series accrued interest account.
• To the series collection account, AESOP I operating lease allocable principal collections,
which will be used to make sequential principal payments to each class until each class is
paid full; provided, however, that if ABCR determines:
- allocable interest collections and other available amounts will be insufficient to
pay due and unpaid monthly interest; and
- series available enhancement is greater than zero,
- then ABCR will reallocate a portion of allocable principal collections to the series
accrued interest account to be treated as interest collections.
Rapid Amortization Events
If any one of the following events shall occur during the revolving period, the accumulation
period or the controlled amortization period with respect to any series of notes issued from
AESOP, an early amortization event will be triggered for all notes outstanding from AESOP:
• AESOP defaults in paying interest on any note of such series when it becomes due and
payable and that default continues for a period of five business days.
• AESOP defaults in paying principal or premium on any note of such series when it
becomes due and payable and such default continues for a period of one business day.
• AESOP fails to comply with any of its other agreements or covenants in, or provisions of,
any series and the failure to comply materially and adversely affects the interest of the
noteholders of any series and continues to materially and adversely affect the interests
of the noteholders for a period of 30 days after the earlier of:
- the date AESOP learns of the instance of noncompliance; or
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Structured Finance
Asset-Backed Securities
U.S.A.
- the date when written notice is given to AESOP by the trustee or to AESOP and
the trustee by the noteholders.
• An event of bankruptcy with respect to AESOP, AESOP Leasing, AESOP Leasing II,
Original AESOP, PVHC, QFM, ABCR or any other lessee.
• Any loan event of default occurs, whether or not it is subsequently waived by AESOP.
• Any aggregate asset amount deficiency exists and continues for a period of 10 days.
• AESOP shall have become an “investment company” or shall have become under the
control of an investment company under the Investment Company Act.
• Any of the loan agreements is terminated for any reason.
• Any representation made by AESOP is false and such false representation materially and
adversely affects the interests of the noteholders of any series, and such false
representation is not cured for a period of 30 days after the earlier of:
- the date AESOP learns of the instance of false representation; or
- the date when written notice is given to AESOP by the trustee or to AESOP and
the trustee by the noteholders.
• Any of the operative documents shall not be in full force and effect or enforceable in
accordance with its terms or if AESOP, any lessee, AESOP Leasing, AESOP Leasing II,
Original AESOP, PVHC, QFM or any manufacturer or administrator states in writing.
• ABCR receives notice of termination of the Computer Services Agreement from
WizCom pursuant to certain sections thereof and, in the case of any such notice
pursuant to a particular section thereof, a qualified successor provider of vehicle
processing services similar to WizCom is not appointed by ABCR on or before the date
that is 180 days prior to the effective date of the termination.
• The occurrence of any event of default described in the licensing agreement.
• The occurrence of any administrator default.
• Any other event shall occur that may be specified in any supplement as an “amortization
event.”
The following constitute an amortization event for the 2023-3 notes, in each case, without
necessity for any action on the part of the trustee or any noteholders, and shall be subject to
waiver only by the consent of the noteholders.
• A CE deficiency occurs and is uncured for at least two business days.
• A series liquidity amount is less than the series required liquidity amount and remains
uncured for at least two business days.
• The collection account, the series collection account, the excess collection account or
the series reserve account are subject to an injunction, estoppel or other stay or lien
outside of liens permitted under the operative documents.
• All P&I is not paid in full on or before the expected maturity date.
• There is no LOC for at least two business days and either a series enhancement
deficiency or a liquidity reserve shortage results from the lack of an LOC.
• The cash collateral account shall be subject to an injunction, estoppel or other stay or
lien outside of permitted liens for at least two business days and either a series
enhancement deficiency or a liquidity reserve shortage results from the exclusion of the
cash collateral account.
• A bankruptcy event shall have occurred with respect to any series LOC provider, or any
series LOC provider repudiates its series LOC or refuses to honor a proper draw
thereon, and either a series enhancement deficiency or a liquidity reserve shortage
results from the exclusion of the LOC.
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Structured Finance
Asset-Backed Securities
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Events of Default
Each lease provides that any one or more of the following will constitute a lease event of default:
• a default in rent payments by any lessee continues for at least five business days;
• any unauthorized assignment or transfer of the lease by any lessee thereunder;
• the failure of any lessee to maintain the insurance required under their lease (or, in the
case of the lease guarantor, the failure to cause to be maintained);
• the failure of any lessee and the lease guarantor to observe or perform any other
covenant, condition, agreement or provision thereof, including, but not limited to, usage
and maintenance and such default continues for more than 30 days after written notice
is sent by the lessor or the trustee;
• if any representation or warranty made by the lessee or the lease guarantor is inaccurate
or incorrect, or is breached, false or misleading, and is not cured within 30 days after
either the receipt of written notice from the lessor, issuer or the trustee or the lessee
otherwise becomes aware of the circumstance;
• certain bankruptcy or insolvency events occur;
• a loan event of default occurs;
• a lease event of default occurs under any other lease; or
• the Pension Benefit Guaranty Corporation or the IRS files a notice of a lien against the
lessee or lease guarantor that lasts for 30 days, unless the lessee or lease guarantor
establishes adequate reserves in respect of the claim giving rise to such lien and is
contesting it in good faith.
Like-Kind Exchange
The Tax Cuts and Jobs Act of 2017 (the Act) repealed the like-kind exchange treatment of
vehicle sales or exchanges as of Jan. 1, 2018. Consequently, ABCR will not exchange vehicles
using the qualified intermediary (QI) unless the tax code is amended further to accommodate
for like-kind exchange treatment.
The like-kind exchange program previously allowed ABCR to defer tax gains on sold vehicles in
the U.S. by replacing the sold vehicles with the vehicle disposition proceeds, typically within
six months of disposition. AESOP Leasing and the other lessees disposed of vehicles through the
QI, AESOP Exchange Corp., and replaced those vehicles with similar vehicles, subject to certain
tax laws and regulations from 2004 to 2017, causing material tax deferral. The inability to utilize
the QI moving forward could increase ABCR’s cash payments to purchase new rental vehicles.
Commingling
From the closing date until the termination of the indenture, AESOP, as issuer, shall cause all
collections due, and to become due to AESOP or the trustee, either to be paid directly to the
trustee for deposit into the collection account or by AESOP Leasing, AESOP Leasing II or any
lessee into the collection account within two business days of its receipt. Payments into the
collection account are deposited daily and are not expected to be concentrated on any specific
days in any given month, satisfying Fitch’s counterparty criteria.
Furthermore, the transaction includes a required liquidity amount in the form of an LOC
amounting to an expected size of 4.00% of the current note balance and/or a cash reserve
account. The initial LOC is expected to be provided by JPMorgan Chase Bank, N.A. rated
AA/F1+/Stable by Fitch. The LOC and/or cash reserve account mitigate potential payment
interruption risk associated with the commingling of collections with the servicer’s general
accounts in a bankruptcy scenario. The liquidity amount adequately supports more than one
month of servicing fee expenses and interest payments for all classes of notes, satisfying Fitch’s
counterparty criteria.
Not for redistribution
Avis Budget Rental Car Funding LLC, Series 2023-3
Presale │ March 27, 2023 fitchratings.com 25
Structured Finance
Asset-Backed Securities
U.S.A.
Hedges
There is no hedge present in this transaction.
Rating Confirmations
Multiple instances in the transaction documents reference potential changes that are subject
to a Fitch rating confirmation. Fitch is not a transaction party and has no obligation to provide
rating confirmations. Fitch will continue to exercise its discretion in choosing to issue a rating
confirmation or otherwise. Where relevant to Fitch’s ratings, the agency prefers to issue public
commentary on the rating impact of the change. Fitch’s approach to and concerns regarding
rating confirmations are highlighted in “Rating Confirmations in Structured Finance and
Covered Bonds,” available at www.fitchratings.com.
Disclaimer
Fitch relies in its credit analysis on legal and/or tax opinions provided by transaction counsel for
the avoidance of doubt. Fitch has always made clear that it does not provide legal and/or tax
advice or confirm that the legal and/or tax opinions, or any other transaction documents, or any
transaction structures, are sufficient for any purpose. The disclaimer at the foot of this report
makes it clear that this report does not constitute legal, tax and/or structuring advice from Fitch
and should not be used or interpreted as legal, tax and/or structuring advice from Fitch.
Should readers of this report need legal, tax and/or structuring advice, they are urged to contact
relevant advisers in the relevant jurisdictions.
Structure Diagram
Avis Budget Car Rental, LLC
(Lessee and Administrator)
Budget Rent a Car System, LLC
(Sublessee)
Existing
Term ABS
and VFNs
Avis Budget Rental Car Funding LLC
(AESOP)
(Issuer)
Avis Rent a Car System, LLC
(Sublessee)
The Bank of New York Mellon
Trust Company, N.A.
(Trustee)
100% Ownership
Zipcar, Inc.
(Sublessee)
Series
2023-3
Notes
JPMorgan Chase Bank, N.A.
Letter of Credit Provider
(Expected)
Lord Securities Corporation
(Backup Administrator and
Managing Agent)
Defi AUTO LLC
f/k/a Fiserv Automotive Solutions
(Backup Disposition Agent)
Citigroup Global Markets Inc.
(Lead Arranger)
AESOP Leasing Corp. II
(Vehicle Purchaser)
AESOP Leasing L.P.
(Vehicle Purchaser)
Avis Budget Group, Inc.
(Sponsor)
.
Payless Car Rental, Inc.
(Sublessee)
Budget Truck Rental, LLC
(Sublessee)
PV Holding Corp.
(Title Nominee)
.
Quartx Fleet Management, Inc.
(Title Nominee)
AESOP Exchange Corporation
(Qualified Intermediary)
IPX1031
(Qualified Intermediary Parent)
Source: Avis Budget Car Rental, LLC
Not for redistribution
Avis Budget Rental Car Funding LLC, Series 2023-3
Presale │ March 27, 2023 fitchratings.com 26
Structured Finance
Asset-Backed Securities
U.S.A.
Counterparty Risk
Fitch assesses the counterparty risk under its “Structured Finance and Covered Bonds
Counterparty Rating Criteria” to be in line with the ratings assigned based on the
documentation provisions and analytical adjustments described in the following table.
Collections will be deposited in the AESOP collection account, which will hold the funds for two
business days prior to deposit into the series collection account. The indenture supplement
includes language on qualified investments for funds in the series collection accounts regarding
Fitch, which includes further qualifications if Fitch rates the notes. For investments other than
money market funds, the investments must have a rating of ‘AA–’ or ‘F1+’ by Fitch. For money
market funds, the fund must have a rating of ‘AAAmmf’ by Fitch or, if such fund is not rated by
Fitch, ratings from two rating agencies from the highest category. Funds on deposit may remain
uninvested if no instruction is provided by AESOP. However, AESOP is directing all investments
within the series’ accounts to be invested in the permitted investments as described.
Criteria Application, Model and Data Adequacy
Criteria Application
See page 2 for the list of Applicable Criteria.
Fitch applies its “Global Rental Fleet ABS Rating Criteria” as its sector-specific criteria under
the overarching framework provided by the “Global Structured Finance Rating Criteria,” which
is the master criteria for the sector. The remaining criteria listed on page 2 under Applicable
Criteria are cross-sector criteria that outline Fitch’s approaches to counterparty risk and
interest rate change vulnerability that are relevant for the ratings.
Data Adequacy
Substantially Material Sources
Fitch received over 11 years of historical fleet data segmented by program and risk for AESOP’s
vehicles. Data provided included fleet OEM concentrations and NBVs, depreciation and
disposition experience and casualty losses. Fitch was also provided with fleet compositions by
make, model, geography and other metrics.
Fitch views the received data as adequate to analyze this series. The data provided were not, to
Fitch’s knowledge, audited by any third parties or internationally recognized accounting firms.
Counterparty Risk Exposures
Counterparty Role/Risk Counterparty
Relevant Ratings
under Criteria
Minimum Ratings and Remedial
Actions under Documents
Adjustment to Analysis If Minimum
Ratings and Remedial Actions Not in Line
with Criteria
Trustee/
Issuer Account Bank Risk
The Bank of New
York Mellon Trust
Company, N.A.
Long-Term/Short-
Term IDR: A/F1
Minimum deposit ratings of A or F1;
replacement or guarantee within 60
calendar days of downgrade below
both minimum ratings.
Minimum ratings and remedial actions are
in line with criteria for eligible accounts.
Servicer/Commingling Risk Avis Budget Car
Rental, LLC
Long-Term/
Short-Term IDRs:
BBB/F2
If rated at least BBB or F2, collections
held until the day on or prior to the
payment date. If downgraded below
the threshold, collections to be
deposited within two days of receipt.
The trustee is also the backup
servicer in the event of the removal or
resignation of the servicer.
Commingling risk is considered immaterial
since funds must be remitted within two
business days.
Servicer/Payment
Interruption Risk
Avis Budget Car
Rental, LLC
NR There is no minimum rating
requirement.
Payment interruption risk is considered
immaterial in the U.S.
Servicing
Continuity Risk
Avis Budget Car
Rental, LLC
NR
There is no minimum rating
requirement.
There is no servicer in rental fleet ABS
issuances. Fitch’s analysis focuses on the
Chapter 7 bankruptcy of the rental car
company and the liquidation of the fleet.
NR – Not rated
Source: Fitch Ratings, Avis Budget Car Rental, LLC
Not for redistribution
Avis Budget Rental Car Funding LLC, Series 2023-3
Presale │ March 27, 2023 fitchratings.com 27
Structured Finance
Asset-Backed Securities
U.S.A.
Fitch deems its expected loss assumptions, derived using the unaudited data, to be reasonable.
The unaudited data received were compared to audited data included in the offering
memorandum circular and are substantively the same as those provided to Fitch. Therefore, no
adjustments were made to Fitch’s analysis.
Use of Third-Party Due Diligence Pursuant to SEC Rule 17g-10
Fitch was provided with third-party due diligence information from Deloitte & Touche LLP.
The third-party due diligence focused on comparing or recomputing certain information with
respect to 365 loans from the statistical data file. Fitch considered this information in its
analysis, and the findings did not have an impact on its analysis. A copy of the ABS Due Diligence
Form-15E received by Fitch in connection with this transaction may be obtained via the link
contained at the bottom of the related rating action commentary (RAC).
Surveillance
Fitch receives servicer reports on a monthly basis that detail asset performance and
characteristics. If a transaction is identified as performing outside of expectations, a full review
will be conducted, and any recommendations will be presented to a rating committee.
If performance remains within expectations, the transaction will receive an in-depth review on
an annual basis.
Transaction surveillance includes an ongoing review of the following: the financial strength or
rating, if applicable, of the RFC and OEMs associated with the program agreements’ terms; any
transaction covenant breaches, such as MTM tests requiring the RFC to increase CE levels if
depreciation and/or disposition values are outside of expectations; fleet management and
servicing, including any material shifts in the concentration of vehicle types and/or OEMs, which
could lead Fitch to reclassify a formerly diverse pool into a nondiverse pool; adequacy of the
borrowing base to ensure full payment of the notes during a liquidation scenario, as well as
ongoing vehicle depreciation and MTMs (valuation versus set residuals/values); and all
transaction fees associated with the transaction, including bond interest, servicing fees,
administrative fees, backup and liquidation fees, and casualty losses, among other items.
Fitch will regularly monitor the transaction. Details of the transaction’s performance are
available to subscribers at https://app.fitchconnect.com/home.
Not for redistribution
Avis Budget Rental Car Funding LLC, Series 2023-3
Presale │ March 27, 2023 fitchratings.com 28
Structured Finance
Asset-Backed Securities
U.S.A.
Appendix 1: Origination and Servicing
Avis Budget Group, Inc.
Avis Budget Group, Inc. (ABG; NASDAQ: CAR) is a leading global provider of vehicle rental and car-
sharing services, and the owner of Avis Budget Car Rental, LLC (ABCR), which operates two of the
most recognized brands in the industry: Avis and Budget. Outside of these brands, ABCR also
operates Zipcar, Payless, Apex Maggiore, France Cars, Morini and Turiscar. The company is a leading
vehicle rental operator in North America, Europe, Australia, New Zealand and certain other regions
it serves. ABG and its licensees operate over 11,000 car and truck rental locations in approximately
180 countries.
Recent 4Q22 Financial Results
For the three-month period ended Dec. 31, 2022, the company reported adjusted EBITDA of
$658 million, with $624 million in the Americas, $63 million from the international business segment
and negative $29 million from the corporate division and other business segments.
This marks Avis’s eighth consecutive quarter of positive adjusted EBITDA since the start of the
pandemic and its strongest quarterly adjusted EBITDA in the Americas to date. Revenue for the
quarter was up 8% compared to 4Q21 and up 28% from 4Q19. Net income for 4Q22 was
$424 million, versus $381 million for the same period yoy.
Brand Overview
Avis serves the premium commercial and leisure travel segments. The Avis brand provides high-
quality car rental services at price points generally above those of nonbranded and value-branded
national car rental companies. ABCR operates or licenses the Avis car rental system, one of the
largest car rental systems in the world, comprising roughly 5,300 locations worldwide, including in
virtually all the largest commercial airports and cities in the world. Avis recently released “Avis Now,”
a mobile application that allows customers to reserve, confirm, choose or upgrade their vehicle,
manage rental time, and add ancillary products and services, all with a smartphone or tablet device.
Budget primarily serves more value-conscious segments of the industry. ABCR operates or licenses
the Budget vehicle rental system, with over 3,800 vehicle rental locations worldwide. Similar to Avis,
Budget is located at most of the largest airports and cities in the world. While Avis is more focused
on commercial customers, Budget’s focus is primarily with leisure customers.
Founded in 2000 and acquired by ABCR in 2013, Zipcar is a leading car-sharing company with more
than 1 million members in the U.S., Canada and Europe. Zipcar was the first car-sharing company in
the U.S. to develop a self-service solution to managing the complex interactions of real-time,
location-based activities inherent in a large-scale, car-sharing operation. Through advanced
technology, Zipcar is able to adequately manage new member applications, reservations and keyless
vehicle access, and fleet and member management.
Payless is a leading rental car supplier positioned to serve the deep value segment of the rental car
industry, operating or licensing 240 locations worldwide. ABCR-operated locations are primarily in
North America, with the majority at or near major airports. Although T&M is often lower than for the
more established brands, Payless has historically achieved greater penetration of ancillary products
and services to customers. Payless operates older vehicles and allows ABCR to shift vehicles out of
Avis or Budget to Payless once they have exceeded certain mileage or age thresholds.
The Budget Truck rental business is one of the largest local and one-way truck rental businesses in
the U.S., with a fleet comprising approximately 20,000 vehicles and a network of approximately
515 dealer-operated and 410 company-operated locations throughout the U.S. These dealers are
independently owned businesses that generally operate other retail service businesses. The Budget
Truck rental business serves both the consumer and light commercial sectors.
ABG also acquired the Apex Maggiore, France Cars, Morini and Turiscar rental brands in 2012, 2015,
2016 and 2018, respectively. Apex operates in the deep value segment of the rental car industry in
Australia and New Zealand, with approximately 30 locations. Apex’s fleet is older and less expensive
than the Avis and Budget fleets and closely resembles the Payless fleet. Apex customers are typically
within the leisure segment and operate rentals for longer time frames. ABG operates or licenses 150
Maggiore locations in Italy with a focus on the leisure, commercial and insurance
replacement/leasing segments. France Cars was acquired in December 2016 and is one of the largest
light commercial fleets in France with approximately 85 rental locations. Apex Maggiore, France
Cars, Morini and Turiscar are not funded by AESOP.
Not for redistribution
Avis Budget Rental Car Funding LLC, Series 2023-3
Presale │ March 27, 2023 fitchratings.com 29
Structured Finance
Asset-Backed Securities
U.S.A.
Appendix 2: ESG Relevance Score
SF ESG Navigator
Credit-Relevant ESG Derivation
Environmental (E)
E Score
Social (S)
S Score
Governance (G)
G Score
ABS - Auto
Avis Budget Rental Car Funding (AESOP) LLC, Series 2023-3
1
2
2
1
1
2
1
2
2
1
3
3
3
3
3
Customer Welfare - Fair Messaging,
Privacy & Data Security
4
3
2
5
Sector-Specific Issues
Regulatory risks, fines, or compliance costs related to emissions,
energy consumption and/or related reporting standards
n.a.
Compliance with consumer protection related regulatory
requirements, such as fair/transparent lending, data security, and
safety standards
Operational Risk; Surveillance

Labor practices, pension obligations and related litigation
General Issues
Reference
Asset Quality; Surveillance
4
3
Asset Quality; Surveillance
Energy Management
Water & Wastewater Management
n.a.
Asset, operations and/or cash flow exposure to extreme weather
events and other catastrophe risk, including but not limited to
flooding, hurricanes, tornadoes, and earthquakes
Asset Isolation and Legal Structure; Asset Quality; Rating Caps;
Surveillance
5
5
4
Labor Relations & Practices
Employee Wellbeing
Exposure to Social Impacts
2
Waste & Hazardous Materials
Management; Ecological Impacts
Exposure to Environmental Impacts
Surveillance
n.a.
n.a.
n.a.
Surveillance
2
1
S Scale
3
General Issues
Human Rights, Community Relations,
Access & Affordability
General Issues
Rule of Law, Institutional and
Regulatory Quality
Jurisdictional legal risks; regulatory effectiveness; supervisory
oversight; foreclosure laws; government support and intervention
1
key driver
0
2
5
4
3
Transaction & Collateral Structure
Transaction Parties & Operational Risk
issues
potential driver
Irrelevant to the transaction or program ratings; relevant to the sector.
Irrelevant to the transaction or program ratings; irrelevant to the sector.
How to Read This Page
ESG
scores range from 1 to
5 based
on
a 15-level color
gradation.
Red (5) is most relevant and green (1) is least relevant.
The Environmental (E),
Social
(S) and
Governance (G) tables
break out the individual components of
the scale. The right- hand box
show s
the aggregate
E, S, or
G score. General
Issues are relevant
across all markets
with Sector-Specific Issues
unique to a particular
asset class. Scores are
assigned to
each sector-specific issue. These
scores signify
the credit-relevance of
the sector-specific issues
to the
transaction’s
or program’s overall
credit rating. The Reference box
highlights the factor(s) within w hich the corresponding ESG issues are
captured in Fitch's credit analysis.
The Credit-Relevant ESG Derivation table shows the overall ESG
score. This score signifies the credit relevance of combined E, S and G
issues to t he transaction’s or program’s credit rating. The thr ee
columns to the left of the overall ESG score summarize the
transaction’s or program’s sub-component ESG scores. The box on the
far left identifies some of the main ESG issues t hat are drivers or
potential drivers of the transaction’s or program’s credit rating
(corresponding with scores of 3, 4 or 5) and provides a brief
explanation for the score.
Classification of ESG issues has been developed from Fitch's sector
ratings criteria. The General Issues and Sector-Specific Issues draw
on the classification standards published by the Sustainability
Accounting Standards Board (SASB).
5
4
3
2
1
How relevant are E, S and G issues to the overall credit rating?
CREDIT-RELEVANT ESG SCALE - DEFINITIONS
Highly relevant; a key transaction or program rating driver that has a
significant impact on an individual basis.
Relevant to transaction or program ratings; not a key rating driver but has
an impact on the ratings in combination with other factors.
Minimally relevant to ratings; either very low impact or actively mitigated
in a way that results in no impact on the transaction or program ratings.
E Scale
GHG Emissions & Air Quality
issues
driver
Avis Budget Rental Car Funding (AESOP) LLC, Series 2023-3 has 5 ESG potential rating drivers
0
Overall ESG Scale
5
issues
not a rating
driver
Avis Budget Rental Car Funding (AESOP) LLC, Series 2023-3 has exposure to macroeconomic factors and sustained structural shifts in secular preferences affecting consumer behavior but this has very
low impact on the rating.
Governance is minimally relevant to the rating and is not currently a driver.
5
issues
4
issues
n.a.
n.a.
Assets' energy/fuel efficiency and impact on valuation
Reference
Sector-Specific Issues
Reference
n.a.
Asset Quality; Financial Structure; Operational Risk; Rating Caps;
Surveillance
Asset Isolation and Legal Structure; Asset Quality; Financial
Structure; Surveillance
Counterparty risk; origination, underwriting and/or aggregator
standards; borrower/lessee/sponsor risk;
originator/servicer/manager/operational risk
Data Transparency & Privacy
G Scale
1
Sector-Specific Issues
Transaction data and periodic reporting
Macroeconomic factors and sustained structural shifts in secular
preferences affecting consumer behavior
Asset Quality; Surveillance
Asset isolation; resolution/insolvency remoteness; legal structure;
structural risk mitigants; complex structures
Asset Isolation and Legal Structure; Asset Quality; Financial
Structure; Rating Caps; Surveillance
Not for redistribution
Avis Budget Rental Car Funding LLC, Series 2023-3
Presale │ March 27, 2023 fitchratings.com 30
Structured Finance
Asset-Backed Securities
U.S.A.
The ratings above were solicited and assigned or maintained at the request of the rated
entity/issuer or a related third party. Any exceptions follow below.
DISCLAIMER & DISCLOSURES
All Fitch Ratings (Fitch) credit ratings are subject to certain limitations and disclaimers. Please read these limitations and
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