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Suzuki Bankruptcy's Impact on Rental Car ABS Slight

American Suzuki Motor Corp.'s, which is the only distributor of Suzuki vehicles in the U.S., bankruptcy filing will reduce the value of Suzuki cars in the U.S. However, in a report released this morning, Moody's Investors Service said it is only marginally negative for the country's rental car ABS sector. This is because Suzuki cars comprise only a very small part of the rental car fleets, Moody's reported.

The auto firm filed for Chapter 11 bankruptcy protection on Nov. 5. It also stated that it will stop selling automobiles as part of a plan to restructure its business.

Moody's noted that if the exposure to Suzuki been greater, the Chapter 11 filing would have been a bigger credit concern. This is because the bankruptcy of an original equipment manufacturer will lessen the value of the related vehicles.

Rental car ABS are usually first an obligation of the rental car company, but if the rental car firm cannot pay or refinance maturing bonds, the value of the cars backs the securities. Because of this reason, rental car ABS deals begin with enough overcollateralization to make up for market value drops resulting from a forced liquidation of vehicles, Moody's said.

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