Leading car rental companies have joined the growing chorus of organisations keen to fill the gaps in funding brought about by reduced bank lending.

In the past week, Europcar has generated 250 million euros through bond issues aimed at providing assistance to boost their rental fleets, while rival Hertz raised 400 million euros through a similar undertaking. Europe’s other leading player, Avis Europe, has also announced their intention to raise up to 130 million euros through a new stock issue.

Barclays Capital’s high-yield credit analyst, Eugene Regis, said the move would result in a potential higher payment to the respective companies for bond financing, but that the benefit would be a set duration on fixed costs, adding that funding certainty would attract more customers back to the rental market.

The capital raising has allayed concerns over how the three dominant European hire vehicle companies can cover funding shortfalls caused banks which have slashed the maturity and size of latest banking facilities. These lines of credit were originally designed to act as a bridge between the operators and the asset-backed security (ABS) market across the continent, with banks initially offering reduced rates in return for management generated fees under ABS plans.

However, the 2007 collapse of the ABS market, which occurred before any such systems could be fully implemented, left banks shying away from the deal and unwilling to re-offer similarly generous terms and conditions. Fortunately for car rental organisations, the high-yield bond issue has helped the banking sector refinance, with maturation of loans over the next five years pointing to a gradual righting of economic stability.