Avis seeks £110m from shareholders

TROUBLED car rental group Avis Europe has launched a deeply-discounted rescue rights issue in a desperate bid to steer its way out of strife.

The company, started struggling with the collapse in the number of US holidaymakers coming to Europe after 9/11, and were compounded as the car hire market became more cut-throat, said today it aimed to raise £110m from its shareholders.

Avis's debt mountain is expected to soar to £1.4bn next month. The four-for-seven rights issue is being offered at only 35p. The shares ended yesterday at 63p.

The company is issuing more than 334m new shares, representing 36% of the enlarged share capital of Avis Europe.

The rights issue is a kick in the teeth for Murray Hennessy, the chief executive brought in by chairman Alun Cathcart last year from the John Lewis department stores group.

He said he needed the cash to help his recovery strategy for the company. "We believe that successful implementation of our recovery strategy should deliver an improvement in operating margins of between three and five percentage points over the next three to four years."

In the past three years Avis's margins collapsed from more than 17% to less than 10%. Operating profits slumped from £216m to £115m.

Hennessy blamed Avis's problems on the company's failure to foresee the changes caused by the rise of the internet.