Moody’s rates Asbury Automotive notes B1

Moody’s Investors Service said it assigned a B1 rating to Asbury Automotive Group, Inc.’s proposed $200 million increase in its senior subordinated notes.

There is no impact on the company’s Ba2 rating or stable outlook, the agency said.

Moody’s said it views these notes as tactical debt to take advantage of favorable market conditions, both from an interest-rate perspective and investor appetite for the auto retail sector.

The agency said it expects Asbury to use the funds for acquisitions and share repurchases with leverage increasing to about 3.8x from about 3.4x for the new debt, which is still well within the limits for the rating.

The ratings recognize the company’s relatively small size as compared to its U.S. peers, along with its market and competitive positions, which are formidable in the markets in which it chooses to operate, Moody’s said.

The ratings also consider Asbury’s historically favorable brand mix with about 80% of new vehicle sales from luxury- and import-brands, the agency said, and its operating profit trend away from new vehicle sales.

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