- The Washington Times - Tuesday, July 30, 2002

Budget Group Inc., the parent company of Budget Rent A Car Corp., filed for Chapter 11 bankruptcy protection, becoming the latest victim of the slump in the travel market yesterday.

Budget joins a list of other rental car companies struggling to survive after the September 11 terrorist attacks.

"Despite the success of our efforts to increase productivity and rationalize costs, the impact of September 11 and the continued recession in the travel sector has left" the company with "debt greater than our operations can reasonably support," said Sandy Miller, chairman and chief executive officer of Budget Group, in a statement.

"We believe that Chapter 11 will accelerate our plan to reduce our debt and will pave the way for new capital investment in the company."

Budget, which also operates the Ryder truck division, has been considering a purchase offer from Cendant Corp., the parent company of competitor Avis, as well as other potential buyers. Budget said in April that it was looking for investors and restructuring debt.

The company expects to announce a new investor within the next several weeks, which will allow Budget to emerge from bankruptcy more quickly, Budget spokeswoman Kimberly Mulcahy said.

"We hope to emerge by the end of the year," she said.

This latest bankruptcy of a car-rental company comes after the Chapter 11 filing in November of ANC Rental Corp, the parent company of Alamo Rent-A-Car and National Car Rental. ANC officials cited the same problems resulting from the September 11 attacks.

"With travel down and more people doing road trips, they aren't renting cars," said Bob Jones, an analyst with OneTravel.com, an online travel service.

The downturn in business travel is also taking a toll on car rentals. "Business travelers really make up more of the market than the leisure travelers do," he said.

Daytona Beach, Fla.-based Budget, which gets half of its U.S. revenue from rentals at airport locations, listed $4.04 billion in assets and $4.33 billion in debt in papers filed in U.S. bankruptcy Court in Delaware.

In June airline passenger traffic, or miles flown by paying customers, remained as much as 14 percent lower at some major U.S. airlines compared with a year ago.

Budget, which has about 3,200 locations worldwide, including Washington Dulles International Airport and Ronald Reagan Washington National Airport, plans to continue its day-to-day operations.

The bankruptcy filing does not include Budget's 2,400 domestic and international franchisees.

"It's really business as usual," Miss Mulcahy said.

The company 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.

Budget shares were delisted from the New York Stock Exchange in March, after falling to 20 cents per share.

They had hit $39 a share in 1998, but the stock began falling after Budget acquired Ryder TRS for $700 million that year. The company assumed $440 million in Ryder's debts.

Yesterday, shares of Budget closed at $0.135 per share in over-the-counter trading.

This article is based in part on wire service reports.

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