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Sonic Automotive Prices $200M Notes

SAH AN KMX

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Sonic Automotive Inc. (SAH - Snapshot Report) has announced the pricing of $200 million senior subordinated notes at 99.110% of the principal amount. The 7.00% senior subordinated notes are due in 2022 with a yield to maturity of 7.125%.

The company will be closing the private offering on July 2, 2012. The proceeds from the offering will be used in repurchasing the outstanding 5.0% Convertible Senior Notes, which are due in 2029. The repurchase would be in exchange of Class A common stock of the company along with cash. It would be used for the related payment of fees and expenses.

Sonic Automotive plans to buy back all the outstanding 5.0% Convertible Senior Notes with the proceeds. The remaining amount would be used for general corporate purposes, including repurchase of Class A common stocks.

Sonic Automotive, in the first quarter of 2012, witnessed a 24% surge in profit to $19.5 million from $15.7 million a year ago. Earnings per share swelled 22% to 33 cents from 27 cents in the first quarter of 2011. However, the results missed the Zacks Consensus Estimate by a penny.

Revenues went up 9.8% year over year to $1.6 billion. The hike was driven by a boost in revenues from new and used vehicles. The company recorded a 12.1% and 9% jump in revenues from new vehicle retail and used vehicle, respectively.

Charlotte, North Carolina-based Sonic Automotive is a Fortune 500 company. It is one of the largest automotive retailers. The company operates with 100 dealerships spread across 15 states and in 26 major metropolitan markets. It represents about 30 different automotive brands with the majority of the dealerships being luxury and import brands. It competes with AutoNation Inc. (AN - Analyst Report) and CarMax Inc. (KMX - Analyst Report).

Currently, Sonic Automotive retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating. We have a long-term (more than 6 months) Neutral recommendation on the stock.

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