LONG-TERM DEBT

Long-term debt consists of the following:



	As of December 31,
	2013			2012
	(In millions)
8.375% Senior Subordinated Notes due 2020	$	300.0		$	200.0
7.625% Senior Subordinated Notes due 2017	—			143.2
Mortgage notes payable bearing interest at fixed and variable rates	166.5			118.9
Real estate credit agreement	75.0			—
Capital lease obligations	3.7			3.9
	545.2			466.0
Add: unamortized premium on 8.375% Senior Subordinated Notes due 2020	9.2			—
Long-term debt, including current portion	554.4			466.0
Less: current portion	(11.1		)	(4.6		)
Long-term debt	$	543.3		$	461.4

The aggregate maturities of long-term debt as of December 31, 2013, are as follows (in millions) (a):




2014	$	10.0
2015	26.4
2016	9.5
2017	9.8
2018	10.1
Thereafter	479.4
	$	545.2

______________________________


(a)	Does not include $9.2 million of unamortized premium that increases the book value of our 8.375% Notes ($1.1 million of which was classified within Current Portion of Long Term Debt as of December 31, 2013).

8.375% Senior Subordinated Notes Add-On Issuance

In June 2013, the Company completed an add-on issuance of $100.0 million aggregate principal amount of 8.375% Senior Subordinated Notes due 2020 (the “8.375% Notes”) at a price of 109.75% of par, plus accrued interest from May 15, 2013 (the "June 2013 Offering"). After deducting the initial purchasers' discounts and expenses of $2.3 million, we received net proceeds of approximately $108.3 million from this offering. The $9.8 million premium paid by the initial purchasers of the 8.375% Notes was recorded as a component of long-term debt on our Consolidated Balance Sheet and is being amortized as a reduction of interest expense over the remaining term of the 8.375% Notes. The capitalized costs associated with the issuance and sale of the 8.375% Notes are being amortized as an addition to interest expense over the remaining term of the 8.375% Notes. Including the amortization of the $9.8 million premium, and assuming the 8.375% Notes are outstanding until their maturity in November 2020, the effective interest rate on the 8.375% Notes issued in the June 2013 Offering will be 6.725%.

Restated Credit Agreement

As discussed above under our “Floor Plan Notes Payable” footnote, the Restated Credit Agreement includes a $175.0 million revolving credit facility with a $50.0 million sublimit for letters of credit. Under the revolving credit facility, subject to a borrowing base, we may (i) borrow up to $175.0 million, which amount may be expanded to up to $225.0 million in total credit availability upon satisfaction of certain conditions and (ii) request Bank of America to issue letters of credit on our behalf up to $50.0 million. Availability under the revolving credit facility is, in part, a function of our borrowing base. Availability is reduced on a dollar-for-dollar basis by the aggregate face amount of any outstanding letters of credit. Based on the borrowing base calculation and the $14.6 million of outstanding letters of credit as of December 31, 2013, our available borrowings were limited to $160.4 million as of December 31, 2013. As of December 31, 2013, we did not have any borrowings outstanding under the revolving credit facility. Proceeds from borrowings from time to time under the revolving credit facility may be used for, among other things, acquisitions, working capital and capital expenditures.

Borrowings under the revolving credit facility bear interest, at our option, based on LIBOR plus 1.75% to 2.75% or the Base Rate plus 0.75% to 1.75%, in each case based on our total lease adjusted leverage ratio. The Base Rate is the highest of the (i) Bank of America, N.A. prime rate, (ii) Federal Funds rate plus 0.50%, and (iii) one month LIBOR plus 1.0%.

In addition to the payment of interest on borrowings outstanding under the senior secured credit facilities, the Borrowers are required to pay a commitment fee on the total commitments under the senior secured credit facilities. The fees for commitments under the new vehicle revolving floor plan facility and the used vehicle revolving floor plan facility are 0.20% per annum and 0.25% per annum, respectively, and are payable on a quarterly basis.

The representations and covenants contained in the Restated Credit Agreement are customary for financing transactions of this nature including, among others, a requirement to comply with a minimum consolidated current ratio and consolidated fixed charge coverage ratio (each as defined in the Restated Credit Agreement) and a maximum consolidated total lease adjusted leverage ratio, in each case as set out in the Restated Credit Agreement. In addition, certain other covenants could restrict the Company's ability to incur additional debt, pay dividends or acquire or dispose of assets. See “Covenants” below.

Redemption of 7.625% Senior Subordinated Notes due 2017

In September 2013, the Company redeemed all of the $143.2 million of its outstanding 7.625% Senior Subordinated Notes due 2017 (the "7.625% Notes"), using proceeds from the June 2013 Offering and borrowings under a real estate term loan credit agreement (the “Real Estate Credit Agreement”). In connection with the redemption, we recognized a $6.8 million loss, which is included in Loss on Extinguishment of Long-Term Debt on the accompanying Consolidated Statements of Income and consisted of (i) $3.6 million of premiums paid pursuant to the terms of the redemption, (ii) a $3.1 million write-off of unamortized debt issuance costs associated with the 7.625% Notes and (iii) $0.1 million of third-party costs associated with the redemption of the 7.625% Notes.

Real Estate Credit Agreement

In September 2013, the Company and certain of its subsidiaries entered into the Real Estate Credit Agreement with Bank of America, as lender. The Real Estate Credit Agreement provides for term loans to certain of the Company’s subsidiaries that are borrowers under the Real Estate Credit Agreement in an aggregate amount not to exceed $75.0 million, subject to customary terms and conditions. In September 2013 and October 2013, the Company borrowed aggregate amounts of $57.3 million and $17.7 million, respectively, under the Real Estate Credit Agreement. As described above, a portion of the proceeds from borrowings under the Real Estate Credit Agreement were used to pay a portion of the redemption price in connection with our redemption of the 7.625% Notes.

Term loans under the Real Estate Credit Agreement bear interest, at the option of the Company, based on the LIBOR plus 2.50% or the Base Rate (as described below) plus 1.50%. The Base Rate is the highest of (i) the Federal Funds rate plus 0.50%, (ii) the Bank of America prime rate, and (iii) one month LIBOR plus 1.0%. The Company is required to make quarterly principal payments of 1.25% of the initial amount of each loan on a twenty year repayment schedule, with a balloon repayment of the outstanding principal amount of loans due in September 2023, subject to an earlier maturity if the Company’s existing senior secured credit facility matures or is not otherwise refinanced by certain dates. The Company can voluntarily prepay any loan in whole or in part any time without premium or penalty.

The representations and covenants contained in the Real Estate Credit Agreement are customary for financing transactions of this nature, including, among others, a requirement to comply with a minimum consolidated current ratio, minimum consolidated fixed charge coverage ratio and maximum consolidated total lease adjusted leverage ratio, in each case as set out in the Real Estate Credit Agreement. In addition, certain other covenants could restrict the Company’s ability to incur additional debt, pay dividends or acquire or dispose of assets.

The Real Estate Credit Agreement also contains events of default that are customary for financing transactions of this nature, including cross-defaults to other material indebtedness. Upon the occurrence of an event of default, the Company could be required to immediately repay all amounts outstanding under the Real Estate Credit Agreement.

Borrowings under the Real Estate Credit Agreement are guaranteed by each operating dealership subsidiary of the Company whose real estate is financed under the Real Estate Credit Agreement, and collateralized by first priority liens, subject to certain permitted exceptions, on all of the real property financed thereunder.

Mortgage Financing

During the year ended December 31, 2013, we also entered into five fixed rate mortgage notes payable, which were collateralized by the related real estate at five of our owned dealership locations. The total initial principal amount of the mortgage notes payable was $52.5 million. In connection with our entrance into these mortgage notes payable, we paid approximately $0.5 million in debt issuance costs, which were capitalized and are being amortized to Other Interest Expense over the terms of the related mortgage notes payable. All five mortgages were financed by the captive finance companies affiliated with two of our manufacturing partners, and are classified as "Captive Mortgages" in the table below.

We have a master loan agreement with Wells Fargo Bank, N.A. (“Wells Fargo”, and the master loan agreement being referred to as the “Master Loan Agreement”). As of December 31, 2013, our obligation under the Master Loan Agreement consists of a single mortgage for certain of our properties in St. Louis, Missouri.

The Master Loan Agreement also contains customary representations and warranties and the guarantees under such agreements contain negative covenants, including, among other things, covenants not to, with permitted exceptions, (i) incur any additional debt; (ii) create any additional liens on the Property (as defined in the Master Loan Agreement); and (iii) enter into any sale-leaseback transactions in connection with the underlying properties.

Below is a summary of our outstanding mortgage notes payable, the carrying values of the related collateralized real estate, and years of maturity as of December 31, 2013 and 2012:



	As of December 31, 2013					As of December 31, 2012
Mortgage Agreement	Aggregate Principal Outstanding		Carrying Value of Collateralized Related Real Estate		Maturity Dates	Aggregate Principal Outstanding		Carrying Value of Collateralized Related Real Estate		Maturity Dates
Real Estate Credit Agreement	$	75.0	$	131.0	2023	$	—	$	—
Master Loan Agreement	18.4		34.3		2015	19.7		35.5		2015
Captive Mortgages	122.7		157.5		2018-2023	73.2		81.4		2018-2023
Other mortgage debt	25.4		38.6		2018-2022	26.0		35.5		2018-2022
Total	$	241.5	$	361.4		$	118.9	$	152.4

Subordinated Note Repurchases

Our board of directors has authorized us, from time to time, to repurchase various of our senior subordinated notes in open market purchases or privately negotiated transactions. The decision to repurchase our senior subordinated notes is dependent upon prevailing market conditions, our liquidity position, applicable limitations in any agreements to which we are a party, and other factors. Currently, the Restated Credit Agreement allows us to purchase at least $50.0 million of our debt securities per calendar year, subject to increase based on availability under our senior secured credit facilities. During 2013, we did not repurchase any of our senior subordinated notes.

As of December 31, 2013, we had $300.0 million of our 8.375% subordinated notes outstanding.

Stock Repurchase and Dividend Restrictions

Pursuant to the indentures governing our 8.375% Notes and the agreements governing our senior secured credit facilities, our ability to repurchase shares of our common stock and pay cash dividends is limited to $88.3 million as of December 31, 2013, with an additional $10.0 million available to repurchase common stock only.

Covenants

We are subject to a number of covenants in our various debt and lease agreements, including those described below. We were in compliance with all of our covenants throughout 2013. Failure to comply with any of our debt covenants would constitute a default under the relevant debt agreements, which would entitle the lenders under such agreements to terminate our ability to borrow under the relevant agreements and accelerate our obligations to repay outstanding borrowings, if any, unless compliance with the covenants is waived. In many cases, defaults under one of our agreements could trigger cross default provisions in our other agreements. If we are unable to remain in compliance with our financial or other covenants, we would be required to seek waivers or modifications of our covenants from our lenders, or we would need to raise debt and/or equity financing or sell assets to generate proceeds sufficient to repay such debt. We cannot give any assurance that we would be able to successfully take any of these actions on terms, or at times, that may be necessary or desirable.

The representations and covenants contained in the Restated Credit Agreement are customary for financing transactions of this nature including, among others, a requirement to comply with a minimum consolidated current ratio and consolidated fixed charge coverage ratio (each as defined in the Restated Credit Agreement) and a maximum consolidated total lease adjusted leverage ratio, in each case as set out in the Restated Credit Agreement. In addition, certain other covenants could restrict our ability to incur additional debt, pay dividends or acquire or dispose of assets.

The Restated Credit Agreement also provides for events of default that are customary for financing transactions of this nature, including cross-defaults to other material indebtedness. In certain instances, an event of default under either the revolving credit facility or the used vehicle revolving floor plan facility could be, or result in, an event of default under the new vehicle floor plan facility, and vice versa. Upon the occurrence of an event of default, we could be required to immediately repay all amounts outstanding under the applicable facility.

Our guarantees under the Master Loan Agreement also require compliance with certain financial covenants, including a consolidated current ratio, consolidated fixed charge coverage ratio and an adjusted net worth calculation.

Certain of our lease agreements also require compliance with various financial covenants and incorporate by reference the

financial covenants set forth in the Restated Credit Agreement. A breach of any of these covenants could immediately give rise to certain landlord remedies under our various lease agreements, the most severe of which include the following: (a) termination of the applicable lease and/or other leases with the same or an affiliated landlord under a cross-default provision, (b) eviction from the premises; and (c) the landlord having a claim for various damages.

Asbury Automotive Group, Inc. is a holding company with no independent assets or operations. For all periods presented, our 8.375% Notes and our 7.625% Notes have been fully and unconditionally guaranteed, on a joint and several basis, by substantially all of our subsidiaries. Any subsidiaries which have not guaranteed such notes are “minor” (as defined in Rule 3-10(h) of Regulation S-X). As of December 31, 2013, there were no significant restrictions on the ability of our subsidiaries to distribute cash to us or our guarantor subsidiaries.