Avis Budget shares drop on debt worries

Avis shares fell 25 cents, or 12.9 percent, to $1.69. The stock has traded between $1.04 and $18.31 during the past 52 weeks.

After the market closed on Thursday, Avis reported that it lost about $1 billion in the third quarter, much of it on writedowns. The loss matched preliminary results released by the company on Oct. 28.

Avis said it cut more than 700 jobs during the quarter, which is expected to save more than $50 million annually. The company employs about 30,000 people.

The Parsippany, N.J.-based company also warned that it may be unable to comply with its financial covenants due to the drop in rental car demand and increased borrowing costs related to fleet financing. Avis plans to seek an amendment to relax some of its requirements.

When borrowers breach the terms set by lenders--often by falling below a certain financial threshold--lenders typically receive the right to demand their money back sooner.

The company declined to update its full-year estimates, saying it has become increasingly difficult to forecast its future results in the current environment. Avis did say it expects the results to be "significantly lower" than its previous estimates.

In a note to investors, Goldman Sachs analyst Christopher Agnew said he remains concerned about the credit environment in light of the news about Avis' covenant revisions. He said the company's steps to reduce costs are "appropriate."

Avis' report followed a spate of bad news for the industry. On Wednesday, Hertz Global Holdings Inc. reported an 89 percent drop in third-quarter profit and said it no longer expects to meet its full-year earnings guidance. The company also announced a plan to cut 1,400 employees, close 80 locations and reduce the size of its vehicle fleets.

Also Wednesday, Dollar Thrifty Automotive Group Inc. warned investors that it expects to book losses for the fourth quarter and the full year.