AutoNation 2005 Annual Report Download - page 58

Table of Contents
AUTONATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company has 9.0% senior unsecured notes outstanding due August 1, 2008. During 2005 and 2004, the Company repurchased
$123.1 million and $3.4 million (face value) of senior unsecured notes at an average price of 110.5% and 114.3% of face value or
$136.0 million and $3.9 million, respectively. The $12.9 million and the $.5 million in premium the Company paid for this repurchase plus
related deferred costs of $4.5 million and $.1 million, respectively, were recognized as Other Interest Expense in the accompanying 2005 and
2004 Consolidated Income Statements. The senior unsecured notes are guaranteed by substantially all of the Company’s subsidiaries.
Through July 14, 2005, the Company had two revolving credit facilities with an aggregate borrowing capacity of $500.0 million. A 364-day
revolving credit facility, which was scheduled to expire in August 2005, provided borrowing capacity up to $200.0 million at LIBOR-plus
125 basis points. A five-year facility, which was scheduled to expire in August 2006, provided borrowing capacity up to $300.0 million at
LIBOR plus 225 basis points. There were no borrowings on these revolving credit facilities during 2005 and 2004. On July 14, 2005, the
Company terminated the credit facilities and entered into a new five-year revolving credit facility with an aggregate borrowing capacity of
$600.0 million presently at a rate of interest of LIBOR plus 75 basis points. The credit spread charged for the revolving credit facility is
impacted by the Company’s senior unsecured credit ratings. The facility is guaranteed by substantially all of the Company’s subsidiaries.
The Company has negotiated a letter of credit sublimit as part of its revolving credit facility. The amount available to be borrowed under the
revolving credit facility is reduced on a dollar-for-dollar basis by the cumulative amount of any outstanding letters of credit, which totaled
$87.6 million at December 31, 2005.
During 2005, the Company repaid $164.4 million of the outstanding balance under mortgage facilities with certain automotive
manufacturers’ captive finance subsidiaries, which includes prepayments totaling $154.0 million. At December 31, 2005, the Company had
$153.7 million outstanding under a mortgage facility with various maturities through 2008. The facility bears interest at LIBOR-based
interest rates (5.2% and 3.5% weighted average for 2005 and 2004, respectively) and is secured by mortgages on certain of the Company’s
store properties.
The Company’s senior unsecured notes, revolving credit facility and mortgage facility contain numerous customary financial and
operating covenants that place significant restrictions on the Company, including the Company’s ability to incur additional indebtedness or
repay existing indebtedness, to create liens or other encumbrances, to sell (or otherwise dispose of) assets and merge or consolidate with
other entities. The indenture for the Company’s senior unsecured notes places significant restrictions on the Company’s ability to make
certain payments (including dividends and share repurchases) and investments. The revolving credit facility also requires the Company to
meet certain financial ratios including financial covenants requiring the maintenance of a maximum consolidated cash flow leverage ratio
and a maximum capitalization ratio. In addition, the senior unsecured notes contain a minimum fixed charge coverage ratio covenant, and
the mortgage facility contains both maximum cash flow leverage ratio and minimum interest coverage ratio covenants. In the event that the
Company were to default in the observance or performance of any of the financial covenants in the revolving credit facility or mortgage
facilities and such default were to continue beyond any cure period or waiver, the lender under the respective facility could elect to terminate
the facility and declare all outstanding obligations under such facility immediately payable. Under the senior unsecured notes, should the
Company be in violation of the financial covenants, it could be limited in incurring certain additional indebtedness. The Company’s revolving
credit facility, the indenture for the Company’s senior unsecured notes, vehicle floorplan payable facilities and mortgage facilities have cross-
default provisions that trigger a default in the event of an uncured default under other material indebtedness of the Company. At
December 31, 2005, the Company was in compliance with the requirements of all such financial covenants.
In the event of a downgrade in the Company’s credit ratings, none of the covenants described above would be impacted. In addition,
availability under the revolving credit facility described above would not be impacted should
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