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AutoCanada announces offering of $125,000,000 Senior Notes, extension of credit facility for three years and selected preliminary 2019 fourth quarter results

EDMONTON, Jan. 28, 2020 /CNW/ - AutoCanada Inc. ("AutoCanada" or the "Company") (TSX: ACQ), a leading multi-location North American automobile dealership group, today announced that it intends to complete a $125 million offering (the "Offering") of 5-year Senior Unsecured Notes (the "Notes"). The Notes will be offered and sold to "accredited investors" in certain provinces of Canada and to non-U.S. persons on a private placement basis. Scotia Capital Inc., CIBC World Markets Inc. and RBC Dominion Securities Inc. are acting as Joint Bookrunning Managers for the Offering. Proceeds of the Offering will be used to refinance the Company's existing 5.625% Senior Notes due May 25, 2021 (the "2021 Notes").

Concurrent with, and conditional on, the closing of the Offering, the Company plans to amend and extend its existing credit facility for three years. The amended credit facility will include a $175 million revolving credit facility, a $750 million wholesale floorplan financing facility and a $25 million wholesale leasing facility, for total aggregate bank facilities of $950 million (the "New Credit Facilities").

AutoCanada intends to use the net proceeds of the Offering, together with borrowings under the New Credit Facility, to fund a cash tender offer (the "Tender Offer") for the purchase of any or all of the 2021 Notes and the redemption of any 2021 Notes not purchased under the Tender Offer. Further details with respect to the Tender Offer are in the Company's press release dated January 28, 2020 announcing the Tender Offer and in the Company's Offer to Purchase dated January 28, 2020 and the related Letter of Transmittal.

Paul Antony, Executive Chairman of the Company, stated, "We are proud of the progress that the AutoCanada team has made in addressing our balance sheet and of the performance of our business through the second half of 2019. This  allows us to enter 2020 focused on delivering a full year of benefits from our Go Forward Plan in both Canada and the U.S."

Mike Borys, Chief Financial Officer of AutoCanada, added, "In addition to the improved deleveraging of the balance sheet in the fourth quarter of 2019, the refinancing of our 2021 Notes and renewal of our credit facility will substantively improve the Company's credit profile and financial flexibility, adding tenor to our overall debt profile."

Preliminary Unaudited Fourth Quarter 2019 Operating Results

Selected preliminary unaudited results for the three months ended December 31, 2019 ("Q4 2019") are highlighted below:

  • Q4 2019 revenue of approximately $805 to $825 million, representing growth of approximately 4% over the same period in 2018;

  • A reduction in total net indebtedness (total indebtedness less cash on hand and exclusive of IFRS 16 lease liabilities) by approximately $44 million in the quarter, from $202 million to $158 million (total debt outstanding of $214 million and cash and cash equivalents of $56 million as at December 31, 2019).  Working capital initiatives implemented in the third quarter of 2019 led to approximately $40 million of this debt reduction.  The Company believes these working capital initiatives are systemic in nature, and are sustainable;

  • Same store new retail unit sales growth of 1.3% compared to the Canadian market decrease of 1.2% for brands represented by AutoCanada, as reported by DesRosiers Automotive Consultants; and

  • An increase in AutoCanada's same store used-to-new vehicles sold ratio to 0.86 in Q4 2019 from 0.70 in Q4 2018.

Q4 2019 results will include write-downs associated with both the Company's U.S. platform (approximately $3 million, subject to finalization and audit) and the Company's non-core asset portfolio (approximately $6 million, subject to finalization and audit).

With the trend of improving results in our U.S. operations, management anticipates a reversal of four U.S. stores held for sale on our balance sheet, adding approximately $36 million of lease liabilities to the 2019 year-end balance.

The Company has not yet completed its financial closing process for Q4 2019, and the selected unaudited results provided above are preliminary estimates. Actual results may differ materially from these estimates due to the completion of the Company's financial closing procedures, final adjustments, review by the Company's auditors and other developments that may arise between now and the time the financial results are finalized. These estimates are not a comprehensive statement of the Company's financial results for Q4 2019 and should not be viewed as a substitute for full financial statements prepared in accordance with International Financial Reporting Standards, and these estimates are not necessarily indicative of the results to be achieved for Q4 2019.

The Company's unaudited financial statements for Q4 2019 will not be available until after the Offering is completed. The Company is issuing preliminary results in order to enable it to disclose such information in connection with the Offering, and the Company does not intend to provide preliminary results in the future. The preliminary results provided in this press release constitute forward-looking statements within the meaning of applicable securities laws, are based on a number of assumptions and are subject to a number of risks and uncertainties. Please see the section below entitled "Forward-Looking Statements".

The preliminary results have been prepared by, and are the responsibility of, management of the Company. The Company's independent registered public accounting firm, PricewaterhouseCoopers LLP, has not reviewed the preliminary results nor have they performed any procedures with respect to the preliminary results. Neither PricewaterhouseCoopers LLP nor any other independent accountants express an opinion or any other form of assurance with respect to the preliminary results.

About AutoCanada

AutoCanada is a leading North American multi-location automobile dealership group currently operating 63 franchised dealerships, comprised of 27 brands, in eight provinces in Canada as well as a group in Illinois, USA and has over 4,200 employees. AutoCanada currently sells Chrysler, Dodge, Jeep, Ram, FIAT, Alfa Romeo, Chevrolet, GMC, Buick, Cadillac, Ford, Infiniti, Nissan, Hyundai, Subaru, Audi, Volkswagen, Kia, Mazda, Mercedes-Benz, Smart, BMW, MINI, Volvo, Toyota, Lincoln, and Honda branded vehicles. In 2018, our dealerships sold approximately 66,000 vehicles and processed approximately 915,000 service and collision repair orders in our 1,157 service bays generating revenue in excess of $3 billion.

Forward-Looking Statements

Certain statements contained in this press release are forward-looking statements and information (collectively, "forward-looking statements") within the meaning of the applicable Canadian securities legislation. We hereby provide cautionary statements identifying important factors that could cause our actual results to differ materially from those projected in these forward-looking statements. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will likely result", "are expected to", "will continue", "is anticipated", "projection", "vision", "goals", "objective", "target", "schedules", "outlook", "anticipate", "expect", "estimate", "could", "should", "plan", "seek", "may", "intend", "likely", "will", "believe" and similar expressions) are not historical facts and are forward looking. In particular, this press release contains forward-looking statements with respect to, among other things, completion of the Offering, use of net proceeds from the Offering, terms of the Notes and anticipated benefits of completing the Tender Offer and the Offering, the expected timing, size or other terms of the Tender Offer, AutoCanada's ability to complete the Tender Offer, the impact of recent working capital initiatives and AutoCanada's financial results for Q4 2019.

The forward-looking statements included in this press release are not guarantees of future performance and should not be unduly relied upon. Readers are cautioned that forward-looking statements are based on current expectations, estimates and projections that, by their nature, forward-looking statements involve a number of known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated and described in the forward-looking statements. These known and unknown risks and uncertainties include, but are not limited to: potential changes in the regulatory and legislative environment; political uncertainty and instability in North America and internationally and changes in political leadership in North America and elsewhere; volatility in interest and tax rates; operating risks inherent in the automotive retail industry; and changes in general economic conditions including the capital and credit markets. The existing credit facility must be amended to permit the completion of a number of aspects of the refinancing transactions. There can be no certainty that an agreement with AutoCanada's lenders will be reached in this respect. If such an agreement is not reached, or for another reason, some or all of the refinancing transactions do not proceed, AutoCanada may be materially adversely impacted.

Forward-looking statements involve estimates and assumptions and are subject to risks, uncertainties and other factors some of which are beyond our control and difficult to predict. Accordingly, actual results or outcomes may differ materially from those expressed in the forward-looking statements. In particular, in presenting its forward-looking statements, AutoCanada has made assumptions respecting, among other things: the anticipated range of interest rates that AutoCanada will be able to obtain for the Notes; the relative stability of general North American economic conditions; that AutoCanada will receive the approvals needed to amend its existing credit facility and regulatory and legislative conditions.

AutoCanada cautions that the foregoing list of assumptions, risks and uncertainties is not exhaustive. The Company's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website at www.sedar.com) describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference. The forward-looking statements contained in this press release speak only as of the date hereof and AutoCanada assumes no obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable securities laws.

Additional Information

Additional information about AutoCanada is available at the Company's website at www.autocan.ca and www.sedar.com.

SOURCE AutoCanada Inc.

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