Bruton Smith dealerships to file for bankruptcy?
Charlotte, N.C.-based Sonic said it had retained Moelis & Company to consider ways to shore up its cash position and address debt coming due this year and next. Sonic, which operates 169 franchised auto dealers in the United States, had been paying a 12 cent per share quarterly dividend. Based on the dealer group's most recent share count, the decision to suspend the dividend would represent an annual cash savings of about $20.6 million. Sonic said it was in compliance with debt covenants under its revolving credit facility.
"Given the continued upheaval in the credit markets and our upcoming debt maturities in 2009 and 2010, we believe the suspension of the dividend and the engagement of Moelis & Company represent a prudent course of action," Sonic President Scott Smith said in a statement.
U.S. auto sales dropped 18 percent in 2008 and are expected to fall further this year. January sales hit 27-year-lows and automakers have said February sales results to date are near the levels of the prior month. Sonic ended the third quarter with $153 million under its revolving credit facility. The company said in late October that it had $105 million outstanding in convertible notes due in May of this year after buying back some of the debt in the market.
Automotive News ranks Sonic as No. 3 among dealership groups in the United States based on retail vehicle sales in 2007, the latest data available. The dealership group relies on California for about 30 percent of its new vehicle revenue and Texas for about 26 percent. Reuters