S&P rates Morgan Auto, notes BB-

S&P said it assigned BB- ratings LCM Investments Holdings II LLC (Morgan Automotive Group) and its planned $650 million of senior unsecured notes due 2031. The notes’ recovery rating is 4 (rounded estimate: 30%), indicating an average recovery in a default. LCM also plans to obtain an unrated five-year $1.2 billion senior secured credit facility.

“Despite its limited scale and narrow geographical presence (only in Florida) relative to publicly rated peers, Morgan Automotive has above-average profitability, demonstrated by EBITDA margins well above 5%. The company owns the real estate for 44 of the 45 dealerships it operates, thereby reducing fixed costs and allowing the company to earn stronger EBITDA margins than its peers',” S&P said in a press release.

LCM plans to use the proceeds to pay down debt, fund a distribution to the owners and for general corporate purposes.

The outlook is stable, indicating the expectation Morgan Automotive will keep generating good cash flow while maintaining robust adjusted EBITDA margins, which will support debt to EBITDA below 4x.

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