Avis: Warrants Could Lower Earnings Results

NEW YORK (AP) — Avis Budget Group Inc. cautioned that warrants related to a notes offering could lower its earnings per share results, according to a regulatory filing Wednesday.

The car-rental company said in a filing with the Securities and Exchange Commission that the warrants could soften earnings results "to the extent that the price of its common stock exceeds the strike price of the warrants."

Shares of Avis slid $1.09, or 8.2 percent, to $12.19 in morning trading. The stock has traded from 34 cents to $14.14 over the past year.

The Parsippany, N.J.-based company said Tuesday it would offer $250 million in convertible senior notes due 2014. The company said it would simultaneously enter a warrant transaction and use part of the offering's proceeds to buy a convertible note hedge. The remaining funds would be put toward general corporate purposes including paying off debt.

Avis said the convertible note hedge and warrant transaction will raise the effective conversion price of the notes. The company added that counterparties to the "call spread" have told it they plan to hedge their exposure by entering derivative transactions that may affect the price of Avis' shares.