AutoCanada Inc. announces add-on offering of $100M senior notes

AutoCanada Inc., a multi-location North American automobile dealership group, intends to offer an additional $100 million aggregate principal amount of its existing 8.75 per cent senior unsecured notes due 2025.

The notes will be offered and sold to “accredited investors” in certain provinces of Canada on a private placement basis.  Scotia Capital Inc., BMO Nesbitt Burns Inc., CIBC World Markets Inc. and RBC Dominion Securities Inc. are acting as Joint Bookrunning Managers, HSBC Securities (Canada) Inc. as Lead Manager, and along with ATB Capital Markets Inc., Canaccord Genuity Corp., Cormark Securities Inc., Stifel Nicolaus Canada Inc., Acumen Capital Finance Partners Limited, and National Bank Financial Inc. who are acting as co-managers for the offering. Proceeds of the offering will be used by the company to reduce the outstanding balance under its syndicated credit facility and for general corporate purposes, including acquisitions.

In addition, effective Apr. 14, 2021, the company has amended and extended its existing credit facility for three years to 2024. The amended credit facility increases the revolving facility by $50 million to $225 million and includes a $1,060 million wholesale floorplan financing facility and a $15 million wholesale leasing facility, for total aggregate bank facilities of $1.3 billion. 

“The strength of our balance sheet, our financial flexibility, our level of debt and our debt leverage will allow us to move forward confidently on acquisitions,” said Mike Borys, CFO of AutoCanada. “Together with cash generated from strong earnings, as well as the $50 million increase to our revolving facility, the add-on offering will allow us to grow the business as we move forward, while continuing to maintain strong discipline over our balance sheet.”

AutoCanada Inc. is currently engaged with multiple potential targets in connection with potential acquisitions in excess of $100 million in transaction value, with the potential deals remaining subject to due diligence, the entering into of definitive agreements, OEM approvals and other standard conditions, as applicable.

AutoCanada Inc. expects these deals will add diversity by geography and OEM brands. Most of this pipeline is represented by franchise dealerships, most of which are located in Ontario, Canada, and the pipeline includes a mix of OEM brands that the company currently operates and brands not yet in the portfolio.

Used vehicle dealerships that would fall under the company’s Used Digital Retail Division platform and collision centres are also included in the pipeline. AutoCanada Inc. says that it expects to finance these potential transactions through a combination of debt and cash from the balance sheet, while ensuring maintenance of the company’s strong balance sheet and financial flexibility.

AutoCanada Inc. anticipates beginning to close on certain of these deals within the second quarter of 2021, while also continuing to develop its acquisition pipeline as the company moves forward beyond these initial acquisition opportunities, but cannot guarantee the completion of all proposed deals.

“We are on track for another record quarter as our team’s relentless execution on daily actions and measures positions us to sustain top-tier operating performance. The strength of our operating platform and balance sheet has enabled us to continue to develop organically as well as to focus on an acquisition and innovation strategy,” added Paul Antony, executive chairman of AutoCanada Inc. ” Given our strong business position and available market opportunities, we see significant opportunities to grow as an industry consolidator in both the short-term and long-term.”