Business Context and Reporting Period
Company: Asbury Automotive Group, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: November 19, 2018
Event Date: November 13, 2018 (Earliest event reported)
Context: The Company entered into two new material definitive real estate term loan credit agreements to refinance existing indebtedness and provide liquidity for general corporate purposes.
Key Financial Metrics and Debt Structure
This filing details the creation of new direct financial obligations rather than reporting operational performance metrics (revenue, profit, cash flow) for a specific period.
| Facility | Lender | Total Commitment | Initial Drawdown | Interest Rate | Maturity Date |
|---|---|---|---|---|---|
| Bank of America Facility | Bank of America, N.A. | $128,120,500 | $25,691,250 | LIBOR + 1.90% or Base Rate + 0.90% | November 13, 2025 |
| Wells Fargo Master Loan Facility | Wells Fargo Bank, N.A. | $100,000,000 | $25,000,000 | LIBOR + 1.85% | December 1, 2028 |
Collateral: Borrowings are guaranteed by applicable operating dealership subsidiaries and collateralized by first priority liens on the real property financed.
Material Changes and Transaction Details
- Refinancing: The initial drawdown under the Bank of America Facility was partially used to refinance certain outstanding mortgage indebtedness.
- Amendments: The Company amended existing credit agreements with both Bank of America and Wells Fargo to conform to the more favorable pricing terms of the new facilities.
- Repayment Terms:
- Bank of America: Quarterly principal payments of 1.25% of the initial loan amount on a 20-year schedule with a balloon payment at maturity.
- Wells Fargo: 108 equal monthly principal payments based on a hypothetical 19-year amortization schedule (commencing after the draw termination date of December 31, 2019) with a balloon payment at maturity.
- Prepayment: Both facilities allow voluntary prepayment in whole or in part at any time without premium or penalty.
Covenants, Risks, and Contingencies
Financial Covenants: Both agreements require the Company to maintain specific financial ratios, including:
- Minimum consolidated current ratio.
- Minimum consolidated fixed charge coverage ratio.
- Maximum consolidated total lease adjusted leverage ratio.
Restrictive Covenants: The agreements may restrict the Company's ability to incur additional debt, pay dividends, or acquire or dispose of assets.
Events of Default: Standard events of default apply, including cross-defaults to other material indebtedness. Upon an event of default, the Company could be required to immediately repay all outstanding amounts.
Related Party Transactions: The Company maintains commercial banking and investment banking relationships with Bank of America and Wells Fargo, which receive customary fees and expenses.
Investor Verification Checklist
- Verify the specific impact of the refinancing on the Company's weighted average cost of debt.
- Review the Company's current consolidated current ratio, fixed charge coverage ratio, and leverage ratio to ensure compliance with the new covenants.
- Assess the liquidity impact of the quarterly principal payments required under the Bank of America Facility.
- Confirm the total outstanding debt load post-drawdown against the Company's existing senior secured credit facility maturity dates.
- Monitor for any future borrowings under the available capacity ($102.4M remaining on Bank of America; $75M remaining on Wells Fargo) prior to the draw termination dates.