Monday, September 14, 2009

Notable financing (SAH)

AlphaNinja - Auto retailer Sonic Automotive(SAH) shares are off 10% this morning, after the company announced a debt and equity offering of a bit more than $225million.

Sonic Automotive intends to offer approximately 9,000,000 shares of its Class A common stock in an underwritten registered public offering. In connection with this offering, Sonic Automotive intends to grant the underwriters a 30-day option to purchase an additional 1,350,000 shares of common stock to cover over allotments.

In conjunction with the common stock offering, Sonic Automotive intends to offer approximately $125,000,000 aggregate principal amount of convertible senior notes due 2029 in an underwritten registered public offering.

Sonic Automotive intends to use the net proceeds from these offerings to repay all or a portion of the principal amount outstanding on its 4.25% Convertible Senior Subordinated Notes due 2015 (which the holders can put to Sonic Automotive in November 2010) and its 6.00% Convertible Senior Subordinated Notes due 2012. If Sonic Automotive is unable to repay these notes, it will use proceeds from the offerings to repay outstanding amounts under its credit facility.

If done properly, Sonic is raising money to retire more expensive debt, so the 10% hit to shares today looks a little harsh. That said, the total 10.3million shares offered would significantly dilute current holders, as there's only 41million shares outstanding.

The most recent quarter's results show used increased sales of used cars offsetting some of the decline in new car sales:


No comments:

Post a Comment