
9.	CREDIT FACILITIES

The Company has a $1.35 billion revolving syndicated credit arrangement with 20 financial institutions including four manufacturer-affiliated finance companies (the “Revolving Credit Facility”). The Company also has a $150.0 million floorplan financing arrangement with Ford Motor Credit Company (the “FMCC Facility”), as well as, arrangements with BMW Financial Services for financing of its new and used vehicles in the U.K. and with several other automobile manufacturers for financing of a portion of its rental vehicle inventory. Within the Company’s Consolidated Balance Sheets, Floorplan Notes Payable — Credit Facility reflects amounts payable for the purchase of specific new, used and rental vehicle inventory (with the exception of new and rental vehicle purchases financed through lenders affiliated with the respective manufacturer) whereby financing is provided by the Revolving Credit Facility. Floorplan Notes Payable — Manufacturer Affiliates reflects amounts payable for the purchase of specific new vehicles whereby financing is provided by the FMCC Facility, the financing of new and used vehicles in the U.K. with BMW Financial Services and the financing of rental vehicle inventory with several other manufacturers. Payments on the floorplan notes payable are generally due as the vehicles are sold. As a result, these obligations are reflected on the accompanying Consolidated Balance Sheets as current liabilities.

The Company receives interest assistance from certain automobile manufacturers. Over the past three years, manufacturers’ interest assistance as a percentage of the Company’s total consolidated floorplan interest expense has ranged from 49.9% in the fourth quarter of 2008 to 91.9% for the first quarter of 2011. The Company records manufacturers’ interest assistance in cost of sales for new vehicle retail sales.

Revolving Credit Facility

Effective July 1, 2011, the Company amended and restated its revolving syndicated credit arrangement with 21 financial institutions including four manufacturer-affiliated finance companies (the “Amended Revolving Credit Facility”). The Amended Revolving Credit Facility expires on June 1, 2016 and consists of two tranches: $1.1 billion for vehicle inventory floorplan financing (the “Amended Floorplan Line”) and $250.0 million for working capital, including acquisitions (the “Amended Acquisition Line”). Up to half of the Amended Acquisition Line can be borrowed in either Euros or Pounds Sterling. The capacity under these two tranches can be re-designated within the overall $1.35 billion commitment, subject to the original limits of a minimum of $1.1 billion for the Amended Floorplan Line and maximum of $250.0 million for the Amended Acquisition Line. The Amended Revolving Credit Facility can be expanded to its maximum commitment of $1.60 billion, subject to participating lender approval. The Amended Floorplan Line bears interest at rates equal to one-month LIBOR plus 150 basis points for new vehicle inventory and one-month LIBOR plus 175 basis points for used vehicle inventory. The Amended Acquisition Line bears interest at the one-month LIBOR plus a margin that ranges from 150 to 250 basis points, depending on the Company’s leverage ratio. The Amended Floorplan Line also requires a commitment fee of 0.20% per annum on the unused portion. The Amended Acquisition Line requires a commitment fee ranging from 0.25% to 0.45% per annum, depending on the Company’s leverage ratio, on the unused portion and from 0.05% to 0.25% per annum, depending on the Company’s leverage ratio, for certain unused portions under $100.0 million.

All of the Company’s domestic dealership-owning subsidiaries are co-borrowers under the Amended Revolving Credit Facility. The Amended Revolving Credit Facility contains a number of significant covenants that, among other things, restrict the Company’s ability to make disbursements outside of the ordinary course of business, dispose of assets, incur additional indebtedness, create liens on assets, make investments and engage in mergers or consolidations. The Company is also required to comply with specified financial tests and ratios defined in the Amended Revolving Credit Facility, such as fixed charge coverage, total leverage, and senior secured leverage. Further, the Amended Revolving Credit Facility restricts the Company’s ability to make certain payments (such as dividends or other distributions of assets, properties, cash, rights, obligations or securities) but excludes Restricted Payments. The Restricted Payments shall not exceed the sum of $100.0 million plus (or minus if negative) (a) one-half of the aggregate consolidated net income of the Company for the period beginning on January 1, 2011 and ending on the date of determination and (b) the amount of net cash proceeds received from the sale of capital stock on or after January 1, 2011 and ending on the date of determination. In the future, the amount of Restricted Payments allowed under the Amended Revolving Credit Facility will equal the Restricted Payments allowed under the Mortgage Facility.

As of June 30, 2011, the Revolving Credit Facility consisted of two tranches: $1.0 billion for vehicle inventory floorplan financing (the “Floorplan Line”) and $350.0 million for working capital, including acquisitions (the “Acquisition Line”). Up to half of the Acquisition Line could be borrowed in either Euros or Pounds Sterling. The capacity under these two tranches could be re-designated within the overall $1.35 billion commitment, subject to the original limits of a minimum of $1.0 billion for the Floorplan Line and maximum of $350.0 million for the Acquisition Line. The Revolving Credit Facility could be expanded to its maximum commitment of $1.85 billion, subject to participating lender approval. The Acquisition Line accrued interest at the one-month LIBOR plus a margin that ranges from 150 to 250 basis points, depending on the Company’s leverage ratio. The Floorplan Line accrued interest at rates equal to one-month LIBOR plus 87.5 basis points for new vehicle inventory and one-month LIBOR plus 97.5 basis points for used vehicle inventory. In addition, the Company paid a commitment fee on the unused portion of the Acquisition Line, as well as the Floorplan Line. The available funds on the Acquisition Line carried a commitment fee ranged from 0.25% to 0.375% per annum, depending on the Company’s leverage ratio, based on a minimum commitment of $200.0 million. The Floorplan Line required a 0.20% commitment fee on the unused portion. In conjunction with the Revolving Credit Facility, the Company had $0.7 million of related unamortized costs as of June 30, 2011 that were being amortized over the term of the facility.

After considering outstanding balances of $503.1 million at June 30, 2011, the Company had $496.9 million of available floorplan borrowing capacity under the Floorplan Line. Included in the $496.9 million available borrowings under the Floorplan Line was $134.2 million of immediately available funds. The weighted average interest rate on the Floorplan Line was 1.1% as of June 30, 2011, excluding the impact of the Company’s interest rate swaps. Amounts borrowed by the Company under the Floorplan Line of the Revolving Credit Facility were to be repaid upon the sale of the specific vehicle financed, and in no case was a borrowing for a vehicle to remain outstanding for greater than one year. With regards to the Acquisition Line, no borrowings were outstanding as of June 30, 2011. After considering $17.3 million of outstanding letters of credit and other factors included in the Company’s available borrowing base calculation, there was $230.6 million of available borrowing capacity under the Acquisition Line as of June 30, 2011. The amount of available borrowing capacity under the Acquisition Line was limited from time to time based upon certain debt covenants.

All of the Company’s domestic dealership-owning subsidiaries were co-borrowers under the Revolving Credit Facility. The Revolving Credit Facility contained a number of significant covenants that, among other things, restricted the Company’s ability to make disbursements outside of the ordinary course of business, dispose of assets, incur additional indebtedness, create liens on assets, make investments and engage in mergers or consolidations. Under the Revolving Credit Facility, the Company was also required to comply with specified financial tests and ratios defined in the Revolving Credit Facility, such as fixed charge coverage, current, total leverage, and senior secured leverage, among others. Further, provisions of the Revolving Credit Facility required the Company to maintain financial ratios and a minimum level of stockholders’ equity (the “Required Stockholders’ Equity”), which effectively limited the amount of disbursements (or “Restricted Payments”) that the Company could make outside the ordinary course of business (e.g., cash dividends and stock repurchases). The Required Stockholders’ Equity was defined as a base of $520.0 million, plus 50% of cumulative adjusted net income, plus 100% of the proceeds from any equity issuances and less non-cash asset impairment charges. The amount by which adjusted stockholders’ equity exceeded the Required Stockholders’ Equity was the amount available for Restricted Payments (the “Amount Available for Restricted Payments”). For purposes of this covenant calculation, net income and stockholders’ equity represented such amounts per the consolidated financial statements, adjusted to exclude the Company’s foreign operations and the impact of the adoption of the accounting standard for convertible debt that became effective on January 1, 2009 and was primarily codified in ASC 470. As of June 30, 2011, the Amount Available for Restricted Payments was $185.4 million. However, the Mortgage Facility (as defined in Note 10) provides for a similar restricted payment basket and was more restrictive as of June 30, 2011 (see discussion of the Mortgage Facility Restricted Payment Basket in Note 10).

As of June 30, 2011, the Company was in compliance with all applicable covenants and ratios under the Revolving Credit Facility. The Company’s obligations under the Revolving Credit Facility were secured by essentially all of the Company’s domestic personal property (other than equity interests in dealership-owning subsidiaries) including all motor vehicle inventory and proceeds from the disposition of dealership-owning subsidiaries.