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Budget Group Seeks Bankruptcy Protection

July 30, 2002|From Bloomberg News

Budget Group Inc. filed for bankruptcy protection Monday as a slump in airport car rentals after the Sept. 11 attacks doomed an attempt to stem losses.

Cendant Corp., the parent of rival Avis, reportedly was considering buying Budget through bankruptcy proceedings.

Budget spokeswoman Kimberly Mulcahy said an announcement is expected soon.

Daytona Beach, Fla.-based Budget, which gets about half its U.S. revenue from rentals at airport locations, listed $4.04 billion in assets and $4.33 billion in debts in Chapter 11 papers filed in U.S. Bankruptcy Court in Wilmington, Del.

Airline passenger traffic, or miles flown by paying customers, remained as much as 14% lower at some major U.S. airlines in June compared with a year earlier.

Traffic also had declined in 2001 because of a slowdown in business travel.

Airline executives have said some travelers have switched to driving their cars or taking trains for shorter distances.

"The impact of Sept. 11 and the continued recession in the travel sector" left the company with debts "greater than our operations can reasonably support," Budget Chief Executive Sandy Miller said.

Budget became the second car rental company to file for Chapter 11 since November, when ANC Rental Corp., the parent of Alamo Rent-A-Car and National Car Rental, asked for bankruptcy protection.

Class A shares of Budget, which reported $2.43 billion in fiscal 2000 sales and a $604.6-million loss, fell 2 cents, to 13 cents, in over-the-counter trading.

Budget said it has obtained a $100-million line of credit to continue operations during the bankruptcy process and a $750-million loan to upgrade its rental fleet.

New York-based Cendant, the world's largest hotel franchiser, declined to comment. Shares of Cendant rose $1.20 to $14.25 in New York Stock Exchange trading.

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