Lithia Taps the Bond Market

Lithia’s Bond Offering

• On 9/3/25, Lithia priced $600mm of 5yr, 5.5% Senior Unsecured Notes at par, which was upsized by $100mm while in-market
• The deal was launched at $500mm and a yield in the high-5%, but strong market demand allowed Lithia to upsize the deal to $600mm while also lowering the coupon to 5.50%
• The proceeds of the offering were used to pay down revolver borrowings
• The agencies affirmed LAD’s issuer ratings of BB+ / Ba1 and unsecured debt ratings BB+ / Ba2, all with stable outlooks

Synopsis

• Lithia’s 5.5% coupon was the lowest yield on a callable high yield bond since Apr-22, and only one of two high-yield bonds in 2025 to price at 5.5% or lower
• Lithia is one of the two dealers to tap the bond market since it has roared back to historically attractive levels after the shock from the tariff pump fake
  • AutoNation was the other dealer to access the bond market in 2025, issuing $600mm of 3-year notes at 4.45% and $500mm of 10-year notes at 5.89%, comprised of senior unsecured notes due 2029 and 2035, respectively
• AutoNation has investment-grade ratings (Baa3/BBB-) and Lithia has non-investment grade ratings (BB+/Ba1); however, Lithia was able to price a lower coupon bond because it was (i) a 5yr maturity (vs 10yr for AN) and (ii) the market has markedly improved from 1Q25