Shares in Avis Europe have fallen sharply after the car giant announced that it is to carry out a £151m rights issue in a bid to bolster its balance sheet.

Proceeds of the discounted issue will allow Avis, which is Europe’s second largest car rental company, to reduce its £758 million debt burden. This will ensure that it is able to meet a €100m (£83m) loan note repayment next year whilst also maintaining its ability to invest in its fleet.

The shares will be offered at 15p, a 57 per cent discount to yesterday’s average price.
Avis Europe’s main shareholder, D’Ieteren has agreed to back the fundraising and the rest of the issue has been fully underwritten.

At the same time as announcing the rights issue, Avis Europe said it had entered into a new €375m senior revolving credit facility to replace the €580m facility that is due to mature in 2011.

Shares in Avis Europe fell 15.1 per cent to 29½p in early morning trading in London on Friday, giving the group a market capitalisation of £272m. The group had net debt of €812m (£670m) at the end of May.