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January
11, 2008
VIA
EDGAR AND HAND DELIVERY
Mr.
Pradip Bhaumkik
Attorney-Advisor
Division
of Corporation Finance
Securities
and Exchange Commission
100
F
Street, N.E.
Washington,
D.C. 20549
Re: Avis
Budget Group, Inc.
Form
10-K for Fiscal Year Ended
12/31/06
Filed
March 1, 2007
File
No. 001-10308
Dear
Mr.
Bhaumkik:
We
transmit herewith for the Staff’s
consideration our response to the comments raised in the Staff’s comment letter
dated December 21, 2007. For your convenience, we have numbered the
comments as set forth in your letter, repeated such comments as set forth in
your letter and set forth our response to each comment immediately below such
comment.
We
are available at your convenience to
discuss these matters with you.
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1.
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We
note from the website of your subsidiary, Budget Rent A Car System,
Inc.
(“Budget”), that Budget rents out cars in several locations in Syria, a
country identified by the U.S. State Department as a state sponsor
of
terrorism, and subject to U.S. economic sanctions and export
controls. Your Form 10-K does not include any information
regarding operations in Syria. Please describe to us the nature
and extent of your past, current, and anticipated operation in, and
other
contacts with, Syria, whether through direct or indirect
arrangements. Your response should describe in reasonable
detail the products and services you have provided into the referenced
countries, and any agreements, commercial arrangements, or other
contacts
with the government of Syria or entities controlled by
it.
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RESPONSE:
In
response to the Staff’s comment, we do not conduct car rental operations in
Syria. Budget-branded vehicle rentals in Syria are conducted by a
sub-franchisee of an independent third party, Zodiac Europe Limited (“Zodiac”),
a wholly owned subsidiary of Avis Europe PLC (“Avis Europe”). Avis
Europe and its subsidiary, Zodiac, are independent companies incorporated in
England, to which we have granted an exclusive, long term license to
use the “Avis” and “Budget” names and marks, respectively, in specific
territories. We have no ownership interest in Avis Europe or
Zodiac.
By
way of
background, in November 2002, we purchased substantially all of the operating
assets of the Budget vehicle rental system from Budget Group, Inc. (“BGI”) and
certain of its subsidiaries (the “Budget Transaction”), which had filed for
bankruptcy reorganization in July 2002. As part of the Budget
Transaction, we purchased BGI’s corporate operations in the Americas, Caribbean,
Australia and New Zealand, its franchise agreements with third parties in such
territories, its rights to franchise and operate in Asia, and the worldwide
rights to the “Budget” name, trademarks and service marks. The Budget
Transaction did not include BGI’s Europe, Middle East and Africa operations and
agreements with existing franchisees in those territories, which were retained
by BGI. BGI continued to operate in those territories pursuant to an
exclusive, fully assignable, royalty-free, long term license (the “License”)
granted to BGI as a condition to BGI’s approval of the Budget
Transaction.
In
January 2003 Zodiac entered into an agreement with certain subsidiaries of
BGI
to purchase BGI’s vehicle rental operations in Europe, Africa and the Middle
East and its franchise agreements with existing BGI franchisees in those
territories (including BGI’s existing sub-franchisee in Syria), and to assume
the License (the “BGI Europe Transaction”). In connection with the
BGI Europe Transaction, our subsidiary, Budget Rent A Car System, Inc.
(“Budget”), entered into a services agreement with Zodiac, granting Zodiac the
right to use Budget’s reservation system, including its website, for a
fee. The fees collected by Budget for reservation services relating
to Zodiac’s operations in Syria are de minimus.
We
have
not entered into any agreement, nor do we maintain business relationships,
with
Zodiac’s sub-franchisee in Syria. We do not provide any products or
services to, or have any employees in, any entity in Syria. Further,
we have previously declined to enforce or renew our trademark registration
in
Syria due to advice of counsel regarding compliance with U.S. trade sanctions,
and our internal compliance policies. Accordingly, we have no
agreements, commercial arrangements or other contacts with the government of
Syria or entities controlled by it and have no plans to enter into any such
agreements, arrangements or contracts in the future.
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2.
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Please
discuss the materiality of any contacts described in response to
the
foregoing comment, and whether they would constitute a material investment
risk for your security holders. You should address materiality
in quantitative terms, including the approximate dollar amounts of
any
associated revenues, assets, and liabilities for the last three years
concerning Syria, and the number of employees, if any, you have in
that
country. Also, address materiality in terms of qualitative
factors that a reasonable investor would deem important in making
an
investment decision, including the potential impact of corporate
activities upon a company’s reputation and share
value.
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We
note, for example, that Arizona and Louisiana have adopted legislation requiring
their state retirement systems to prepare reports regarding state pension fund
assets invested in, and/or permitting divestment of state pension fund assets
from, companies that do business with countries identified as state sponsors
of
terrorism. The Missouri Investment Trust has established an equity
fund for the investment of certain state-held monies that screens out stocks
of
companies that do business with U.S. -designated state sponsors of
terrorism. The Pennsylvania legislature has adopted a resolution
directing its Legislative Budget and Finance Committee to report annually to
the
General Assembly regarding state funds invested in companies that have ties
to
terrorist-sponsoring countries. Your materiality analysis should
address the potential impact of the investor sentiment evidenced by such actions
directed toward companies that have operations associated with
Syria.
Your
qualitative materiality analysis also should address whether, and the extent
to
which, the government of Syria, or persons or entities controlled by that
government, receive cash or act as intermediaries in connection with your
operations and other contacts.
RESPONSE:
As
described in our response to the Staff’s comment #1, we do not conduct any
operations or have any employees in Syria. Budget-branded vehicle
rentals in Syria are conducted by a sub-franchisee of Zodiac. Zodiac
uses Budget’s reservation software and website for a fee. Our fees
derived from the reservation services relating to Zodiac’s sub-franchised
operations in Syria are less than $1,000 in the aggregate for the last three
years. We neither provide cash to the government of Syria or any
persons or entities controlled by that government nor have any other connection
or relationship with any such person, whether directly or acting as an
intermediary. We believe that our limited indirect contact with
Syria, as described above and in our response to comment #1, is not material
(including in relation to our overall operations) and therefore would not cause
a material investment risk to our shareholders or reflect negatively upon our
reputation or share value.
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3.
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We
note on pages 4-5 and elsewhere in your Form 10-K that both Avis
and
Budget operate in the Caribbean and the Middle East. Your
filing does not include any specific information regarding operations
in
other countries located in the referenced regions that are identified
by
the U.S. State Department as state sponsors of terrorism and are
subject
to U.S. economic sanctions and export controls. If applicable,
please provide us the same type of information and materiality analysis
pertaining to your operations and contacts in any such other countries
as
you provide us regarding Syria in response to the foregoing
comments.
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RESPONSE:
We
conduct Avis and Budget vehicle rental operations through our subsidiaries
in
the Caribbean. However, we do not conduct any operations in Cuba
either directly or though a franchisee, and we have no employees in
Cuba. We do not conduct any Avis- or Budget-branded car rental
operations in any other countries identified as state sponsors of terrorism
by
the U.S. State Department.
In
addition, apart from Zodiac’s sub-franchisee in Syria, disclosed in our
responses above, we have been informed by Zodiac that Zodiac does not conduct
any Budget-branded car rental operations in any other countries identified
as
state sponsors of terrorism by the U.S. State Department. We have
also been informed by Avis Europe that Avis Europe does not conduct any
Avis-branded car rental operations in any countries identified as state sponsors
of terrorism by the U.S. State Department.
*
*
*
The
Company acknowledges that the Company is responsible for the adequacy and
accuracy of the disclosure in the filing; Staff comments or changes to
disclosure in response to Staff comments do not foreclose the Commission from
taking any action with respect to the filing; and the Company may not assert
Staff comments as a defense in any proceeding initiated by the Commission or
any
person under the federal securities laws of the United States.
Please
contact our General Counsel, Karen Sclafani, at (973) 496-3565 or the
undersigned at (973) 496-5959 should you require further information or have
any
questions.
Very
truly yours,
/s/
Ronald L. Nelson
Ronald
L. Nelson
Chairman
and Chief Executive
Officer