ASSOCIATED PRESS Budget will continue to rent cars after the nation's third-largest car rental agency filed for bankruptcy protection.

Cendant looking to
buy bankrupt Budget

No changes are planned
for Hawaii operations

Cendant unit buys Kona timeshare

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By Phil Milford
Bloomberg News

WILMINGTON, Del. >> Budget Group Inc. filed for bankruptcy protection as a slump in airport car rentals after the Sept. 11 attacks doomed an attempt to stem losses.

Cendant Corp., the parent of rival Avis, is considering buying Budget through bankruptcy proceedings, according to the Wall Street Journal. Budget spokeswoman Kimberly Mulcahy said an announcement is expected soon, and that the company expects a short bankruptcy process.

The Cendant deal "makes sense for both parties," said Neil Abrams of Abrams Consulting Group in Purchase, New York, which doesn't own Budget stock. "I still think it's likely."

Budget Rent a Car Hawaii is owned by Budget, not franchised, and will be subject to the Chapter 11 reorganization process.

The local firm, which has 620 employees on all major islands, is continuing to operate as usual, and has no plans for layoffs or salary reductions, said spokesman Gordon Kai. Employees are awaiting further word of what the reorganization will entail.

Ryder Truck Rental in Hawaii is part of Ryder System Inc., which is not affiliated with Budget Group Inc. and is not part of the bankruptcy.

Ryder System Inc. sold its consumer-oriented "yellow" truck rental division in 1996. Those business operations are now operated by Budget under Ryder TRS, which is part of the bankruptcy.

Daytona Beach, Fla.-based Budget, which gets about half its U.S. revenue from rentals at airport locations, listed $4.04 billion in assets and $4.33 billion in debts in Chapter 11 papers filed in U.S. Bankruptcy Court in Wilmington, Del.

Airline passenger traffic, or miles flown by paying customers, remained as much as 14 percent lower at some major U.S. airlines in June compared with a year ago. Traffic had also declined in 2001 because of a slowdown in business travel. Airline executives have said some travelers have switched to driving their cars or taking trains for shorter distances.

"The impact of Sept. 11 and the continued recession in the travel sector" left the company with debts "greater than our operations can reasonably support," Sandy Miller, chief executive officer of Budget, said in a statement. Budget became the second car rental company to file for Chapter 11 since November, when ANC Rental Corp., the parent of Alamo Rent-A-Car and National Car Rental, asked for bankruptcy protection.

Budget, which also operates the Ryder TRS truck-rental business, said it has about $745 million in public debt, including $429.7 million in 9.125 percent senior notes due in 2006.