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Genuine Parts eyes senior notes, new term loans, upsized revolver for acquisition
By Devika Patel
Knoxville, Tenn., Sept. 25 – Genuine Parts Co. plans to issue new multi-currency senior notes as well as negotiate new term loans and an increase to its revolver in order to finance its planned $2 billion acquisition of Alliance Automotive Group.
The acquisition agreement also requires the company to repay Alliance Automotive Group’s debt.
“We expect to finance the acquisition with the combination of new term loan agreements, new senior notes, as well as the upsizing of our existing revolving credit agreement,” executive vice president and chief financial officer Carol Yancey said on the company’s conference call announcing the transaction on Monday.
The company’s management has nothing firm to report on these financings, but has a rough idea that its leverage metrics will be 2x debt to EBITDA and that the company will have about $3 billion in debt.
“We are currently negotiating these financing agreements and will share more details on these arrangements and our related interest costs as that information is finalized.
“We can tell you that we expect our capital structure to include approximately $3 billion in debt upon closing, which is an estimated 2x EBITDA or 50% of total debt to total capital,” Yancey said.
The company plans to reduce its leverage gradually after the acquisition closes.
“Going forward, we will use our strong cash flows to pay down the incremental borrowings,” Yancey said.
“We have no exact timetable on that plan, but we expect to reduce our leverage ratio gradually as we move forward,” she said.
The transaction is expected to close in the fourth quarter of 2017.
Atlanta-based Genuine Parts distributes automotive replacement parts.
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