Item 1.01 Entry into a Material Definitive Agreement.
On July 6, 2020, we amended our U.S. credit agreement (the “U.S. credit agreement”) with Mercedes-Benz Financial Services USA LLC and Toyota Motor Credit Corporation to provide for an additional $100 million of borrowing capacity effective August 1, 2020. The U.S. credit agreement, as amended August 1, will provide for up to $800 million in revolving loans for working capital, acquisitions, capital expenditures, investments and other general corporate purposes, which includes $250 million in revolving loans solely for acquisitions, and up to $50 million of letters of credit. The U.S. credit agreement provides for a maximum of $150 million of borrowings for foreign acquisitions and expires on September 30, 2022. The interest rate on revolving loans is LIBOR plus 1.75%, subject to an incremental 1.25% for uncollateralized borrowings in excess of a defined borrowing base. In April of 2020, the lenders consented to a deferral of interest under the U.S. Credit Agreement for the months of April, May and June, until December 2020.
The U.S. credit agreement is fully and unconditionally guaranteed on a joint and several basis by substantially all of our U.S. subsidiaries and contains a number of significant covenants that, among other things, restrict our ability to dispose of assets, incur additional indebtedness, repay certain other indebtedness, pay dividends, create liens on assets, make investments or acquisitions and engage in mergers or consolidations. We are also required to comply with specified financial and other tests and ratios, each as defined in the U.S. credit agreement including: a ratio of current assets to current liabilities, a fixed charge coverage ratio, a ratio of debt to stockholders’ equity and a ratio of debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”). A breach of these requirements would give rise to certain remedies under the agreement, the most severe of which is the termination of the agreement and acceleration of the amounts owed.
The U.S. credit agreement also contains typical events of default, including change of control, non-payment of obligations and cross-defaults to our other material indebtedness. Substantially all of our U.S. assets are subject to security interests granted to the lenders under the U.S. credit agreement.
We purchase motor vehicles from Daimler AG and Toyota Motor Credit Corporation, affiliates of the respective lenders under the U.S. credit agreement, for sale at certain of our dealerships. The lenders also provide certain of our dealerships with mortgage, “floor-plan” and consumer financing.
The foregoing description of the amendment is qualified in its entirety by references to the amendment, which is filed as an exhibit and incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
Exhibit 4.1 Sixth Amendment to Fifth Amended and Restated Credit Agreement dated July 6, 2020 among us, Mercedes-Benz Financial Services USA LLC and Toyota Motor Credit Corporation.
