Case Study · High Yield Notes
Morgan Add-on Funds South Motors Acquisition
$350mm Add-on to 2031 Senior Notes for M&A
January 2024
- On 1/8/24, Morgan Automotive Group priced a $350mm add-on to its 8.25% senior notes due Aug-31 at 102.5% of par, a 7.804% yield to maturity
- The proceeds of the offering, combined with borrowings under the issuer’s revolving credit facilities and cash on hand, funded the nearly $800mm acquisition of South Motors
- The deal was upsized by $50mm while in market, based on strong investor demand
- Morgan Automotive is a private U.S. automotive retailer rated BB- / Ba3 at the issuer level (stable outlook), with the notes rated B+ / B2
- S&P views the tack-on offering as leverage neutral and projects that, pro forma for the acquisition, the company will have $700mm of total liquidity via balance sheet cash, revolver availability, and its asset-based loan facility; Moody’s expects pro forma debt/EBITDA of ~3.1x
- The initial $500mm 8.25% 2031 Unsecured Notes priced in Jul-23; the notes are first callable on 8/1/26 at $104.125
| Final Terms | 2031 Notes |
|---|---|
| Pricing Date | January 8, 2024 |
| Issuer | LCM Investments Holdings II |
| Corporate Ratings | BB- / Ba3 |
| Bond Ratings | B+ / B2 |
| Issue | Add-on to 8.25% Senior Unsecured Notes due 2031 |
| Amount | $350mm ($850mm total) |
| MaturityCall | August 20317.6yr; first call Aug-26 |
| Price / YieldSpread vs US Treasuries | 102.5 / 7.804%(T + 380 bps) |
| Yield to Worst (8/6/26)Spread vs US Treasuries | 5.81%(T + 176 bps) |
Ratings: S&P / Moody's at pricing.
Sources: S&P Global Ratings bulletin dated 1/8/24; Latham & Watkins announcement dated 1/10/24
Case studies are prepared by Trackhawk Advisors from the sources cited on each page. They are for information only and are not investment advice or a recommendation to buy or sell any security.
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