Item 1.01.
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Entry into a Material Definitive Agreement.
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On March 10, 2017, Sonic Automotive,
Inc. (the Company) issued and sold $250,000,000 aggregate principal amount of its 6.125% Senior Subordinated Notes due 2027, Series A (the Notes) at an issue price of 100%. The Notes were offered and sold either to
qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the Securities Act), or to persons outside the United States in compliance with Regulation S under the Securities Act. A
substantial portion of the net proceeds will be used to redeem all of the Companys outstanding 7.0% Senior Subordinated Notes due 2022 (the 7.0% Notes) pursuant to the terms of the indenture governing those notes. Nothing in this
Current Report on Form 8-K shall be deemed to be a notice of redemption for the 7.0% Notes.
The Notes were issued under an Indenture,
dated as of March 10, 2017 (the Indenture), by and among the Company, certain subsidiary guarantors named therein (the Guarantors) and U.S. Bank National Association, as trustee. The Notes are unconditionally guaranteed,
jointly and severally, on a senior subordinated basis by all of the Companys operating domestic subsidiaries. The Indenture provides that interest on the Notes will be payable semi-annually in arrears on March 15 and September 15 of
each year, beginning on September 15, 2017. The Indenture also contains customary restrictive covenants and default provisions for an issue of senior notes of this nature. The Notes will mature on March 15, 2027, unless earlier redeemed or
repurchased by the Company. The Notes and the guarantees are unsecured senior subordinated obligations and are subordinated to all of the Companys and the Guarantors existing and future senior debt. In addition, the Notes are
structurally subordinated to all of the liabilities of the Companys subsidiaries that are not guaranteeing the Notes, to the extent of the assets of those subsidiaries. A copy of the Indenture is filed with this Current Report on Form 8-K as
Exhibit 4.1 and is incorporated herein by reference.
The Notes will be redeemable at the Companys option, in whole or in part, at
any time on or after March 15, 2022 at the following redemption prices, which are expressed as percentages of the principal amount.
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Period
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Redemption Price
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Beginning March 15, 2022
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103.063
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%
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Beginning March 15, 2023
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102.042
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%
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Beginning March 15, 2024
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101.021
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%
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Beginning March 15, 2025 and thereafter
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100.000
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%
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Before March 15, 2022, the Company may redeem all or a part of the Notes, subject to payment of a make-whole premium. In
addition, the Company may redeem up to an aggregate of 35% of the Notes on or before March 15, 2020 with the net cash proceeds from certain equity offerings.
In addition, the Company and the Guarantors entered into a Registration Rights Agreement, dated as of March 10, 2017 (the
Registration Rights Agreement), with Merrill Lynch, Pierce, Fenner & Smith Incorporated, on behalf of itself and as representative of the several initial purchasers, pursuant to which the Company and the Guarantors have agreed
to file an exchange offer registration statement to exchange the Notes for notes registered under the Securities Act with substantially identical terms or, under certain circumstances, to file a shelf registration statement to cover resales of the
Notes. If the Company does not satisfy its obligations within the prescribed time periods or otherwise, it would be required to pay additional interest on the Notes until the Company satisfies those obligations. A copy of the Registration Rights
Agreement is filed with this Current Report on Form 8-K as Exhibit 4.2 and is incorporated herein by reference.
Some of the initial purchasers and their affiliates have engaged in, and may in the future engage
in, investment banking, commercial banking, financial advisory and other commercial dealings in the ordinary course of business with the Company or its affiliates. They have received, or may in the future receive, customary fees and commissions for
these transactions. An affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated is the administrative agent and a lender under the Companys amended and restated syndicated revolving credit facility (the 2016 Revolving
Credit Facility) and the Companys amended and restated syndicated new and used vehicle floor plan credit facilities (collectively, the 2016 Credit Facilities). Affiliates of J.P. Morgan Securities LLC, Wells Fargo Securities,
LLC, U.S. Bancorp Investments, Inc. and Comerica Securities, Inc. are also lenders under the 2016 Credit Facilities. Affiliates of Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC are also letter of credit
issuers under the 2016 Revolving Credit Facility. Affiliates of J.P. Morgan Securities LLC, Wells Fargo Securities, LLC and U.S. Bancorp Investments, Inc. are counterparties to interest rate swap agreements with the Company, and affiliates of
Merrill Lynch, Pierce, Fenner & Smith Incorporated provide the Company treasury management services. An affiliate of U.S. Bancorp Investments, Inc. serves as the trustee under the indentures governing certain of the Companys
outstanding debt securities, including the 7.0% Notes. In addition, from time to time, certain of the initial purchasers and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves
or their customers, long or short positions in the Companys debt or equity securities or loans. The initial purchasers or their affiliates may own the 7.0% Notes. As a result, some of the initial purchasers or their affiliates may receive part
of the net proceeds from the sale of the Notes by reason of the redemption of the 7.0% Notes held by them.
The foregoing summaries of
documents described above do not purport to be complete and are qualified in their entirety by reference to the full text of such documents, which are filed as exhibits hereto.