Business Context and Reporting Period
Company: Asbury Automotive Group, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: November 19, 2021
Event: Entry into Material Definitive Agreements regarding the issuance of senior notes.
Key Financial Metrics and Debt Issuance
The Company issued two series of senior notes on November 19, 2021, totaling $1.4 billion in aggregate principal amount:
- 2029 Notes: $800,000,000 aggregate principal amount; 4.625% interest rate; matures November 15, 2029.
- 2032 Notes: $600,000,000 aggregate principal amount; 5.000% interest rate; matures February 15, 2032.
Interest Payments: Semiannual payments on May 15 and November 15, commencing May 15, 2022.
Use of Proceeds: To fund the acquisition of Larry H. Miller Dealerships and Total Care Auto (the "LHM Acquisition"), pay related fees/expenses, and for general corporate purposes including other acquisitions.
Material Changes and Covenants
This filing represents a significant increase in the Company's long-term debt obligations. The Indentures contain restrictive covenants limiting the ability to incur additional indebtedness, issue preferred stock, make dividends or distributions, sell assets, and create liens. These covenants may be suspended if the Notes receive certain investment-grade credit ratings.
Outlook, Risks, and Contingencies
Acquisition Contingency: The Notes are tied to the LHM Acquisition. If the Company notifies the Trustee it is no longer pursuing the acquisition, or if the acquisition does not close by July 7, 2022, the Company must redeem the Notes at 100% of the issue price plus accrued interest.
Partial Closing Contingency: If the acquisition closes for less than all intended assets by July 7, 2022, the Company must redeem Notes equal to the unused net proceeds (with an option to retain up to $250 million).
Redemption Rights:
- 2029 Notes: Redeemable after November 15, 2024. Prior to that date, up to 40% may be redeemed with equity proceeds at 104.625%, or all notes may be redeemed at a make-whole premium.
- 2032 Notes: Redeemable after November 15, 2026. Prior to that date, up to 40% may be redeemed with equity proceeds at 105.000%, or all notes may be redeemed at a make-whole premium.
Change of Control: The Company must offer to repurchase the Notes if it sells certain assets or experiences specific changes of control.
Investor Verification Checklist
- Verify the status of the LHM Acquisition and whether the July 7, 2022 closing deadline is met to avoid mandatory redemption.
- Review the full text of the Indentures (Exhibits 4.1 and 4.2) for specific covenant exceptions and definitions of "Change of Control."
- Monitor the Company's credit rating to determine if covenants are suspended upon achieving investment-grade status.
- Assess the impact of the new debt service obligations (interest payments starting May 2022) on future cash flow.