Penske Redeems $57.3 Million Notes

Penske Automotive Group Inc. (PAG - Analyst Report), on September 27, announced that it has redeemed the remaining 7.75% senior subordinated notes due 2016. Earlier, the company redeemed around 85% (or $317.7 million) of the $375 million of 7.75% senior subordinated notes due 2016, and $57.3 million notes remained outstanding. The outstanding notes were redeemed at a price of 103.875%, plus accrued and unpaid interest excluding September 27, 2012.

Penske purchased the $375 million senior subordinated notes with the proceeds from the offering of $550 million of 5.75% senior subordinated notes due 2022. The offering, which closed on August 28, 2012, was made to qualified institutional buyers in the U.S. with respect to Rule 144A.

The company utilized the remaining amount of the proceeds to repay its current dues under the U.S. credit agreement and settlement of its U.S. floor plan borrowings.

Penske, in the second quarter of 2012, witnessed a 31% rise in adjusted earnings per share to 55 cents from 42 cents per share in the corresponding quarter last year. The results surpassed the Zacks Consensus Estimate by a penny. Profit escalated 26.4% to $49.5 million from $39.2 million in the year-ago quarter.

Revenues increased 19.2% year over year to $3.4 billion, surpassing the Zacks Consensus Estimate of $3.3 billion. The growth was attributable to a 20.9% increase in retail sales volume, a 24.8% surge in new vehicle and a 16.4% hike in used vehicle unit sales.

Penske Automotive Group sells new and previously owned vehicles along with finance and insurance products. It operates 339 retail automotive franchises, providing 40 different brands and 30 collision repair centers. Apart from its franchises in U.S. and Europe, the company offers repair and maintenance services to the brands it sells.

The company’s product mix, including a wide range of imported and luxury brands, helps it maintain a strong foothold in both the U.S. and international markets. It competes with Lithia Motors (LAD - Snapshot Report), AutoNation Inc. (AN - Analyst Report) and Sonic Automotive (SAH - Snapshot Report).

Currently, Penske has a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating. We have a long-term Neutral recommendation on the stock.