Item 1.01 – Entry into a Material Definitive Agreement.
Purchase Agreement
On October 6, 2021, Group 1 Automotive, Inc. (the “Company”) entered into a purchase agreement (the “Purchase Agreement”), by and among the Company, BofA Securities, Inc., as representative of the initial purchasers listed in Schedule 1 thereto (the “Initial Purchasers”), and the guarantors listed in Schedule 2 thereto (collectively, the “Guarantors”), which provides for the sale by the Company of an additional $200,000,000 aggregate principal amount of its 4.000% Senior Notes due 2028 (the “New Notes”) to the Initial Purchasers (the “Offering”). The New Notes will be sold to investors at an offering price of 100.250% of the principal amount, which implies an effective yield to maturity of approximately 3.957%. The New Notes will be guaranteed on an unsecured senior basis (the “Guarantees”) by each of the Guarantors. The closing of the issuance and sale of the New Notes is expected to occur on October 21, 2021, subject to customary closing conditions.
The New Notes will be issued as additional notes under the indenture dated August 17, 2020, entered into among the Company, the Guarantors and Wells Fargo Bank, National Association, as trustee, pursuant to which the Company issued to the $550.0 million in aggregate principal amount of its 4.000% senior unsecured notes due 2028 (the “Initial Notes”). The New Notes will have identical terms as the Initial Notes, other than the issue date, and the New Notes and the Initial Notes will be treated as a single class of securities under the indenture.
The Company expects to receive net proceeds of $197.3 million from the Offering after deducting the Initial Purchasers’ discounts and commissions and estimated offering expenses. The Company intends to use the net proceeds of the offering to fund a portion of the consideration for the acquisition of substantially all of the assets or equity of the Prime Automotive Group (the “Prime Acquisition”) or, if the Prime Acquisition is not consummated, for general corporate purposes, which may include the repayment of existing indebtedness.
The New Notes and Guarantees will be offered and sold to the Initial Purchasers pursuant to an exemption from the registration requirements under the Securities Act of 1933, as amended (the “Securities Act”). The Initial Purchasers intend to resell the New Notes to persons reasonably believed to be qualified institutional buyers under Rule 144A of the Securities Act and to persons outside the United States pursuant to Regulation S of the Securities Act.
The Purchase Agreement contains customary representations, warranties and covenants and includes the terms and conditions for the sale of the New Notes, indemnification (including indemnification for liabilities under the Securities Act) and contribution obligations and other terms and conditions customary in agreements of this type.
The summary of the Purchase Agreement set forth in this Item 1.01 does not purport to be complete and is qualified by reference to such agreement, a copy of which is being filed as Exhibit 10.1 hereto and is incorporated herein by reference.
The information contained in this Current Report on Form 8-K, including the exhibits, shall not constitute an offer to sell or the solicitation of an offer to buy the New Notes nor shall there be any sale of the Notes in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
Relationships
Certain of the Initial Purchasers and their affiliates have engaged, and may in the future engage, in investment banking, commercial banking and other financial advisory and commercial dealings with the Company and its affiliates. In particular, U.S. Bank National Association, an affiliate of U.S. Bancorp Investments, Inc., is the administrative agent under the Company’s revolving credit facility and affiliates of certain of the Initial Purchasers are lenders under the Company’s revolving credit facility. In addition, Wells Fargo Bank, National Association, an affiliate of Wells Fargo Securities, LLC, will be the trustee under the indenture that will govern the notes. Wells Fargo Bank, National Association would also be the administrative agent and lender under the bridge loan facility (if the Company proceeds with borrowing under the bridge loan facility).
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