Item 1.01. Conclusion of a significant definitive agreement
Second Amendment to the Fourth Amended and Restated Loan Agreement
On June 2, 2022, Lithia Motors, Inc. (the “Company”) has entered into a second amendment (the “Second Amendment”) to its Fourth Amended and Restated Loan Agreement (the “Credit Facility”) with National Association of American Banks as agent of the lenders, and each of the lenders party to the loan agreement, as lenders (collectively, the “Lenders”). Capitalized terms used but not defined in the following description of the Second Amendment have the meaning set forth in Appendix A to the Second Amendment.
The credit facility continues to provide a total funding commitment of
$3.75 billionwhich may be expanded under the Second Amendment, subject to lender approval and satisfaction of other conditions, to a total of
$4.5 billion. Among other changes, the Second Amendment:
•Incorporates the adoption of the Secured Overnight Funding Rate (SOFR) as a replacement for the London Interbank Offered Rate (LIBOR). • Modifies the initial allocation of the funding commitment up to $1.0 billion in the financing of used vehicle inventories, up to $1.0 billion in revolving financing for general corporate purposes, including acquisitions and working capital, up to $1.7 billion in the financing of new vehicle inventory plans, and up to $50 million loan-in-service vehicle floor plan financing. • Amends the Company’s option to reallocate commitments under the credit facility, so that new and used vehicle floor plan commitments can have unlimited allocation and the total loan commitment renewable cannot exceed 40% of the total commitment amount, and the overall loan service vehicle floor plan commitment cannot exceed 3% of the overall commitment amount. • Modifies the conditions for including real estate in the revolving borrowing base to better facilitate real estate loans and modifies the overall ceiling for $1,000,000,000.
A copy of the Second Amendment is set forth as Exhibit 10.1 to this current Report on Form 8-K (the “Report”) and is incorporated herein by reference. The description of the Second Amendment in this report is a summary only and is qualified in its entirety by reference to the actual terms of the Second Amendment.
The lenders and their affiliates have normal business dealings with the Company and its subsidiaries, including the provision of commercial banking, investment banking, trustee and/or other financial services.
Canadian Credit Agreement
On June 3, 2022, Lithia Master LP Company, LP (“Lithia Master LP“), as principal borrower, and certain other Canadian subsidiaries of the Company (collectively, the “Borrowers”) have entered into a credit agreement (the “Canadian Credit Agreement”) with The Bank of Nova Scotia (” BNS”), Royal Bank of Canada, Bank of Montreal, The Toronto-Dominion Bank, Credit VW Canada, Inc. and BMW Group Financial Services, as lenders (collectively, the “Canadian Lenders”), and BNS, as administrative agent for the Canadian Lenders. Pursuant to the Canadian Credit Agreement, the Canadian Lenders have assumed all of the indebtedness of the Borrowers under this certain Commitment Letter, dated August 30, 2021, between the Borrowers and BNS (as amended, the “Letter of Commitment”), including the Letters of Credit issued thereunder, and agreed to certain new and amended terms. Capitalized terms used but not defined in the following description of the Canadian Credit Agreement have the meanings given to them in the Canadian Credit Agreement.
Among other things, the Canadian Credit Agreement establishes a total funding commitment of approximately $1.125 billion CAD, including (i) up to CA$100,000,000 to finance the working capital of the Borrowers and for general corporate purposes (the “Revolving Facility”); (ii) until C$500,000,000 to finance the purchase of new motor vehicles (the “Wholesale Flooring Facility”); (iii) until
CA$100,000,000 to finance the purchase of second-hand motor vehicles intended for
Canada and for export to United States (the “Used Vehicle Flooring Installation”); (iv) up to CA$400,000,000 for wholesale leasing financing of leased units and financing contracts (the “Wholesale Leasing Facility”), and (v) up to CA$25,000,000 to fund certain motor vehicle leases (the “Daily Lease Facility” and, collectively with the facilities listed in (i) through (iv), the “Canadian Facilities”). The Canadian Credit Agreement also establishes sub-limits for commitments of lines of credit and/or commitments of letters of credit under certain of the Canadian facilities and incorporates an accordion feature to increase the maximum potential borrowings under wholesale floor ease up
$200,000,000 and under other Canadian installations until $200,000,000 generally.
Borrowings under the Canadian Credit Agreement bear interest at rates equal to the greater of the BNS Prime Rate or the Canadian Dollar Offer Rate plus, in each case, a spread, the spreads ranging from 0.25% per year at 1.30% per year. All of the Canadian Facilities other than the Wholesale Flooring Facility, which is a demand facility, mature on June 3, 2025.
The Canadian Credit Agreement is secured by all personal property and assets of the Borrowers and includes financial and restrictive covenants typical of such agreements, and conditions to the Canadian Lenders’ obligations to make advances under the Canadian Credit Agreement. , including Basic Borrowing Requirements, and representations and warranties of Borrowers. The financial clauses include the requirements Lithia Master LP on a consolidated basis, maintain a fixed charge coverage ratio of at least 1.20:1 and a leverage ratio of no more than 5.75:1. The covenants impose certain restrictions on each of the borrowers, among other things, to incur additional debts (other than the debts authorized thereunder), to incur liens (other than the liens authorized thereunder) , complete certain fundamental corporate transactions and export certain financed vehicles outside of Canada. In addition, the Canadian Credit Agreement imposes conditions on Lithia Master LP possibility of making certain distributions, among others.
All debts and obligations of the Borrowers to the Canadian Lenders under the Canadian Credit Agreement shall, at the option of the Canadian Lenders, become immediately due and payable upon the occurrence of certain customary events set forth in the Canadian Credit Agreement, including defaults. of payment, breaches of the Canadian Credit Agreement and other related agreements and event of insolvency of any Borrower, provided, however, that the Wholesale Floor Facility is a demand facility and is repayable within 120 days of demand from Canadian lenders.
A copy of the Canadian Credit Agreement is set out in Schedule 10.2 to this report and is incorporated herein by reference. The description of the Canadian Credit Agreement in this report is a summary only and is qualified in its entirety by reference to the actual terms of the Canadian Credit Agreement.
Section 2.03. Creation of a direct financial obligation or an obligation under an off-balance sheet arrangement of a registrant.
The information set forth above under Section 1.01 of this Current Report on Form 8-K is incorporated by reference in this Section 2.03.
Item 9.01 Financial statements and supporting documents
Exhibit No. Description
10.1 Second Amendment to Fourth Amended and Restated Loan Agreement, dated June 2,
2022, among Lithia Motors, Inc., the subsidiaries of Lithia Motors, Inc. listed
on the signature pages of the agreement or that thereafter become borrowers
thereunder, the lenders party thereto from time to time, and U.S. Bank National
10.2 Credit Agreement, dated June 3, 2022, among Lithia Master LP Company, LP, the
subsidiaries of Lithia Motors, Inc. listed on the signature pages of the
agreement or that thereafter become borrowers thereunder, Lithia Master GP
Company, Inc. and the other general partners of the Borrowers, the lenders party
thereto from time to time, and The Bank of Nova Scotia.*
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
*Certain confidential and immaterial terms removed pursuant to SK Rule 601(b)(10)(iv).
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