ABG

Business Context and Reporting Period

Company: Asbury Automotive Group, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: October 17, 2011
Event Date: October 14, 2011
Context: The Company entered into a new senior secured credit agreement to replace existing facilities and announced a severance agreement with its Senior Vice President and Chief Financial Officer.

Key Financial Metrics and Debt Structure

This filing details the establishment of new debt facilities rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period.

Maturity Date: October 14, 2016.
Collateral: Liens on substantially all present and future assets (excluding real property) of the Company and guarantors.
Financial Covenants: Minimum consolidated current ratio, minimum consolidated fixed charge coverage ratio, and maximum consolidated total lease adjusted leverage ratio.

Material Changes Versus Prior Period

• Termination of Old Facilities: The Company terminated a $150.0 million revolving credit facility and a $50.0 million used vehicle floor plan facility. Neither had material amounts outstanding at termination.
• Refinancing: Borrowings under the new New Vehicle Floorplan Facility were used to repay and terminate substantially all existing inventory financing facilities, except for those relating to new Ford/Lincoln vehicles and certain loaner vehicles.
• Expansion of Capacity: The new agreement provides an aggregate increase in borrowing capacity compared to the terminated facilities, with options to increase the Revolving Credit Facility by up to $50.0 million and the Floorplan Facilities by up to $225.0 million without lender consent, subject to conditions.

Guidance, Outlook, and Management Commentary

Use of Proceeds:

• Revolving Credit Facility: Acquisitions, working capital, and capital expenditures.
• New Vehicle Floorplan Facility: Financing acquisition of new vehicle inventory and refinancing inventory at acquired dealerships.
• Used Vehicle Floorplan Facility: Financing acquisition of used vehicle inventory, working capital, capital expenditures, and refinancing used vehicles.

Executive Compensation Change:

• Scott J. Krenz (SVP and CFO) entered into a severance agreement effective July 27, 2011.
• Entitlements include one year of base salary, pro-rated bonus, and benefits continuation if terminated without cause prior to July 27, 2014, or if his office is relocated more than 50 miles, duties are diminished, or salary is reduced.
• Similar benefits apply for termination without cause within two years following a change in control after July 27, 2014.

Risks and Contingencies:

• Events of Default: Customary events of default apply, including cross-defaults to other material indebtedness. An event of default under one facility could trigger a default under others.
• Restrictions: Covenants may restrict the ability to incur additional debt, pay dividends, or acquire/dispose of assets.
• Related Party Transactions: Certain lenders under the new agreement were lenders under the terminated facilities and received payments equal to outstanding amounts. Lenders may also receive customary fees for other banking services.

Important Facts for Investor Verification

• Verify the specific definitions of "Total Lease Adjusted Leverage Ratio" and other financial covenants in the Credit Agreement (Exhibit 10.1) to assess compliance risks.
• Confirm the exact amount of inventory financing remaining with Ford/Lincoln and loaner vehicle facilities that were not refinanced.
• Review the Severance Agreement (Exhibit 10.6) for specific details on the "change in control" definition and any potential acceleration of benefits.
• Monitor the Company's ability to meet the minimum consolidated current ratio and fixed charge coverage ratio requirements.
• Check for any subsequent filings regarding the utilization of the $900.0 million credit facility.