Sonic Automotive says revolver 'more than sufficient' for operations

By Jennifer Lanning Drey

Portland, Ore., June 2 - Sonic Automotive, Inc.'s current revolving credit availability provides "more than sufficient cushion" for the company given its lowered capital expenditures and lack of plans for acquisitions, Greg Young, Sonic's vice president of finance, said during a Tuesday presentation at the Stephens Inc. Spring Investment Conference in New York.

The company's current revolver availability has remained virtually flat with $51 million reported at the end of April, despite Sonic's usage of $15 million to pay bondholders upon the closing of its debt restructuring on May 7.

"That tells me we're generating cash from operations and that the revolving balance continues to decline as those cost reductions and other things we've got going on take hold," Young said.

Sonic expects to realize $85 million of structural cost reductions throughout 2009.

After revising its debt covenants at the end of the first quarter, Sonic believes it also has plenty of room going forward to meet the covenants, he said.

With the closing of the debt restructuring in May, Sonic now has more time to focus on disposing of some of its luxury dealerships, which the company hopes will help generate cash and allow it delever over time.

Regarding its exposure to General Motors, Sonic has received letters related to the closure of four of its 26 GM stores. Sonic plans to appeal two of the letters.

The company has three Chrysler stores, one of which is slated to close, he said.

Sonic is an automotive retailer based in Charlotte, N.C.

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