Lithia Motors Inc. (LAD) announced completion of five-year revolving syndicated credit facility of $650 million with ten institutions. The company expanded the credit facility more than three times to $650 million due in 2017 from $200 million, when it was initiated on September 30, 2011. It can be extended upto $800 million.
The institutions include four auto manufacturing related finance companies and six commercial banks. The manufacturing-related companies include Mercedes-Benz Financial Services of Daimler (DDAIF); Toyota Motor Credit Corporation of Toyota Motor Corp. (TM); BMW Financial Services of BMW; and Nissan Motor Acceptance Corporation of Nissan Motor Co. (NSANY).
The credit will be used for new vehicle inventory floorplan financing ($500 million) and vehicle inventory floorplan financing ($100 million). These will result in reduction in borrowing costs to the extent of $1.7 million per year. The remaining $50 million will be used for general corporate purposes, including working capital, acquisitions and additions of new dealerships.
The company aims to grow through new dealership in target markets. The company plans to penetrate the urban market through its luxury brands and rural market through mainstream brands. Accordingly, it has acquired the Rasmussen network of Mercedes-Benz and Mini dealership in Portland in 2011.
Lithia Motors, Inc. is the ninth largest automotive retailer in the U.S. With 83 stores in operation in 11 states, the company supplies 25 brands of new and used vehicles. It also provides finance, warranty, and credit insurance contracts.
Lithia Motors recorded a 26% increase in profits to 48 cents per share in the fourth quarter of 2011, compared with 38 cents per share in the corresponding quarter last year. The profit surpassed the Zacks Consensus Estimate by 10 cents per share. However, revenues in the quarter rose 33% to $717.5 million.
Currently, the company retains a Zacks #1 Rank, which implies a Strong Buy rating for the short-term and we have an Outperform recommendation on the shares of the company for the long-term.
DAIMLER AG (DDAIF): Free Stock Analysis Report
LITHIA MOTORS (LAD): Free Stock Analysis Report
NISSAN ADR (NSANY): Free Stock Analysis Report
TOYOTA MOTOR CP (TM): Free Stock Analysis Report
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