Penske Automotive Group Inc. (PAG), on August 14, said that it is planning an initial offering of $400 million senior subordinated notes at fixed rates due in 2022. With an increase of $150 million over this amount, the company subsequently declared the pricing of $550 million of 5.75% senior subordinated notes due in 2022.
The offering will be made to qualified institutional buyers in the U.S. with respect to Rule 144A. Outside the U.S. the offerings will be made in accordance with Regulation S of the Securities Act of 1933.
The proceeds from this offering will be utilized in the purchase of all the company’s $375 million of 7.75% senior subordinated notes due 2016 and for the payment of fees and expenses related to the offering. The remaining amount will be utilized in the repayments of the company’s current dues under the U.S. credit agreement and settlement of its U.S. floor plan borrowings.
Moody's has upgraded the debt ratings for Penske based on its improving financial profile, especially in the UK, despite of the weak economic condition. The rating service has also raised the corporate family and probability of default ratings to "Ba3" from "B1" and senior subordinated debt ratings to "B2" from "B3" with a stable outlook.
Standard & Poor's Ratings Services has assigned 'B' rating to Penske’s proposed $400 million senior subordinated debt offering. It has also allocated '6' rating to debt a recovery rating as it expects that lenders would receive around 0% to 10% recovery of the principal amount in case of a default. The rating service has a stable outlook due to the improved credit measures, along with revenue growth and brand mix, which will lead to generation of free cash flow.
Penske Automotive Group sells new and previously owned vehicles along with finance and insurance products. It operates 340 retail automotive franchises, providing 41 different brands and 30 collision repair centers. Apart from its franchises in U.S. and Europe, the company offers repair and maintenance services to the brands it sells.
The company’s product mix, including a wide range of imported and luxury brands, helps it maintain a strong foothold in both the U.S. and international markets. It competes with Lithia Motors (LAD) and Sonic Automotive (SAH). Currently, Penske has a Zacks #3 Rank, which translates into a short term (1 to 3 months) Hold rating.
LITHIA MOTORS (LAD): Free Stock Analysis Report
PENSKE AUTO GRP (PAG): Free Stock Analysis Report
SONIC AUTOMOTVE (SAH): Free Stock Analysis Report
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