J.P. Morgan and Bank of America are leading an $800 million senior secured credit facility for Asbury Automotive Group. The company's last facility was led by Ford Motor Credit Company, but Asbury decided to go with a bank syndicate this time around, bucking the trend of dealerships taking loans from original equipment manufacturers (OEMs).
The two banks are the largest providers to the auto industry outside of the OEMs, said Gordon Smith, senior v.p. and cfo. "The old facility was made up of a syndicate headed by Ford and we decided we would put together a bank syndicate that complemented our flooring with some of the OEMs," Smith said. "Our old facility with Ford was coming due at the beginning of next year," he noted. "In anticipation of that, we started looking at all of our relationships on both floor planning and the revolver to see if we wanted to go in a new direction. So it was just the right time with things coming due."
The bank facility consists of a three-year, $150 million revolver with an evergreen provision. This is priced according to leverage starting at LIBOR plus 2% and rising to LIBOR plus 3%. The facility also includes a $650 million floor plan line of credit on new and used vehicle inventory, which can only be used for inventory. Pricing on the floor plan tranche is LIBOR plus 125 to 137.5 basis points.
"Where we need to borrow funds is for acquisitions," said Smith. "With respect to the revolver, it's pretty much to fund our future acquisitions." The previous revolver was $100 million and was put in place in 2000. Although a majority of this revolver will be for acquisitions, the company has the option to use it for other general purposes. "We always have deals we're looking at," said Smith. "There is nothing that [we are] going to fund in the next month or so, but we are always looking at several acquisition targets." The majority of the company's facilities are located in the South or on the West Coast. It had revenue of approximately $5.3 billion in 2004 and currently operates 94 retail auto stores.
The automotive retail and service company also has floor-plan financing for Asbury's Ford and GM-branded stores provided by Ford Motor and General Motors Acceptance Corporation for a combined amount of $250 million bringing the total borrowings to $1.05 billion. In addition to commercial banks, Ford, Toyota Financial Services and BMW Financial Services also participated in the $800 million credit line.
The company previously worked with J.P. Morgan on a sub debt facility serving as the co-manager in December 2003. Bank of America has served as the cash management provider for the company.