Debt

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Debt

DEBT

Non-Vehicle Long-Term Debt

Non-vehicle long-term debt consisted of the following:

Debt Description	Maturity Date	Interest Payable	June 30, 2023		December 31, 2022
3.5% Senior Notes	November 15, 2024	May 15 and November 15	$	450.0	$	450.0
4.5% Senior Notes	October 1, 2025	April 1 and October 1	450.0		450.0
3.8% Senior Notes	November 15, 2027	May 15 and November 15	300.0		300.0
1.95% Senior Notes	August 1, 2028	February 1 and August 1	400.0		400.0
4.75% Senior Notes	June 1, 2030	June 1 and December 1	500.0		500.0
2.4% Senior Notes	August 1, 2031	February 1 and August 1	450.0		450.0
3.85% Senior Notes	March 1, 2032	March 1 and September 1	700.0		700.0
Revolving credit facility	March 26, 2025*	Monthly	—		—
Finance leases and other debt	Various dates through 2041		369.3		375.5
			3,619.3		3,625.5
Less: unamortized debt discounts and debt issuance costs			(24.0)		(26.0)
Less: current maturities			(12.8)		(12.6)
Long-term debt, net of current maturities			$	3,582.5	$	3,586.9
* As described below under “Debt Refinancing Transaction,” we amended and restated our credit agreement on July 18, 2023, and extended the maturity date to July 18, 2028.

Debt Refinancing Transaction

On July 18, 2023, we amended and restated our unsecured credit agreement to, among other things, (1) increase the revolving credit facility commitment from $1.8 billion to $1.9 billion, (2) extend the maturity date to July 18, 2028, (3) allow for the maximum leverage ratio covenant to increase from 3.75x to 4.25x for four fiscal quarters in the event that we complete a material acquisition, and (4) replace the maximum capitalization ratio covenant with a minimum interest coverage ratio covenant.

Senior Unsecured Notes and Credit Agreement

The interest rates payable on our 3.5% Senior Notes, 4.5% Senior Notes, 3.8% Senior Notes, and 4.75% Senior Notes are subject to adjustment upon the occurrence of certain credit rating events as provided in the indentures for these senior unsecured notes.

Prior to its amendment and restatement as described above under “Debt Refinancing Transaction,” our credit agreement provided for a $1.8 billion revolving credit facility that was scheduled to mature on March 26, 2025. The amended and restated credit agreement provides for a $1.9 billion revolving credit facility that matures on July 18, 2028. Our amended and restated credit agreement continues to contain an accordion feature that allows us, subject to credit availability and certain other conditions, to increase the amount of the revolving credit facility, together with any added term loans, by up to $500.0 million in the aggregate. As of June 30, 2023, we had no borrowings outstanding under our revolving credit facility. We continue to have a $200.0 million letter of credit sublimit as part of the revolving credit facility under our amended and restated credit agreement. The amount available to be borrowed under the revolving credit facility is reduced on a dollar-for-dollar basis by the cumulative amount of any outstanding letters of credit, which was $0.7 million at June 30, 2023. At June 30, 2023, our borrowing capacity under our credit agreement was $1.8 billion.

Our revolving credit facility under our amended and restated credit agreement provides for a commitment fee on undrawn amounts ranging from 0.125% to 0.20% and interest on borrowings at SOFR plus a credit spread adjustment of 0.10% or the base rate, in each case plus an applicable margin. The applicable margin ranges from 1.125% to 1.50% for SOFR borrowings and 0.125% to 0.50% for base rate borrowings. The interest rate charged for our revolving credit facility is affected by our leverage ratio. These pricing terms remain unchanged from the credit agreement that was in place at June 30, 2023.

Within the meaning of Regulation S-X, Rule 3-10, AutoNation, Inc. (the parent company) has no independent assets or operations. If guarantees of our subsidiaries were to be issued under our existing registration statement, we expect that such guarantees would be full and unconditional and joint and several, and any subsidiaries other than the guarantor subsidiaries would be minor.

Other Long-Term Debt

At June 30, 2023, we had finance leases and other debt obligations of $369.3 million, which are due at various dates through 2041.

Commercial Paper

We have a commercial paper program pursuant to which we may issue short-term, unsecured commercial paper notes on a private placement basis. At June 30, 2023, the maximum aggregate amount that could be outstanding at any time was $1.0 billion. The interest rate for the commercial paper notes varies based on duration and market conditions. The maturities of the commercial paper notes may vary, but may not exceed 397 days from the date of issuance. Proceeds from the issuance of commercial paper notes are used to repay borrowings under the revolving credit facility, to finance acquisitions, and for strategic initiatives, working capital, capital expenditures, share repurchases, and/or other general corporate purposes. We plan to use the revolving credit facility under our credit agreement as a liquidity backstop for borrowings under the commercial paper program. A downgrade in our credit ratings could negatively impact our ability to issue, or the interest rates for, commercial paper notes.

At June 30, 2023, we had $465.0 million of commercial paper notes outstanding with a weighted-average annual interest rate of 5.73% and a weighted-average remaining term of 5 days. At December 31, 2022, we had $50.0 million of commercial paper notes outstanding with a weighted-average annual interest rate of 4.30% and a weighted-average remaining term of 1 day.

Non-Recourse Debt

Non-recourse debt relates to auto loans receivable of our captive auto finance company funded through non-recourse funding facilities, including warehouse facilities and asset-backed term funding transactions.

We have two warehouse facility agreements with certain banking institutions through wholly-owned, bankruptcy-remote, special purpose entities, primarily to finance the purchase and origination of auto loans receivable. We fund auto loans receivable through these warehouse facilities, which are secured by the eligible auto loans receivable pledged as collateral.

Additionally, we have term securitizations that were put in place to provide long-term funding for certain auto loans receivable initially funded through the warehouse facilities. In these transactions, a pool of auto loans receivable is sold to a bankruptcy-remote, special purpose entity that, in turn, transfers the receivables to a special purpose securitization trust (“term securitization trust”). The term securitization trust issues asset-backed securities, secured or otherwise supported by the transferred receivables, and the proceeds from the sale of the asset-backed securities are used to finance the securitized receivables.

We are required to evaluate the term securitization trusts for consolidation. We retain the servicing rights for the auto loans receivable that were funded through the term securitizations. In our capacity as servicer of the underlying auto loans receivable, we have the power to direct the activities of the trusts that most significantly impact the economic performance of the trusts. In addition, we have the obligation to absorb losses (subject to limitations) and the rights to receive any returns of the trusts, which could be significant. Accordingly, we are the primary beneficiary of the trusts and are required to consolidate them.

We recognize transfers of auto loans receivable into the warehouse facilities and term securitizations (together, “non-recourse debt”) as secured borrowings, which result in recording the auto loans receivable and the related non-recourse debt on our Unaudited Condensed Consolidated Balance Sheets. The non-recourse debt is structured to legally isolate the auto loans receivable, which can only be used as collateral to settle obligations of the related non-recourse debt. The term securitization trusts and investors and the creditors of the warehouse facilities have no recourse to our assets for payment of the debt beyond the related receivables, the amounts on deposit in reserve accounts, and the restricted cash from collections on auto loans receivable.

Non-recourse debt outstanding at June 30, 2023, and December 31, 2022, consisted of the following:

	June 30, 2023		December 31, 2022
Warehouse facilities	$	166.4	$	181.8
Term securitization debt of consolidated VIEs	99.3		146.9
	265.7		328.7
Less: unamortized debt discounts and debt issuance costs	(3.5)		(5.1)
Less: current maturities	(10.5)		(10.7)
Non-recourse debt, net of current maturities	$	251.7	$	312.9

The timing of principal payments on the non-recourse debt is based on the timing of principal collections and defaults on the related auto loans receivable. The current portion of non-recourse debt represents the portion of the payments received from the auto loans receivable that are due to be distributed as principal payments on the non-recourse debt in the following period.

One of the warehouse facilities matures on October 1, 2023, and the other matures on December 17, 2023. Aggregate commitments under the warehouse facilities total $350.0 million.

The term securitization debt of consolidated VIEs consists of various notes with interest rates ranging from 0.69% to 4.45% and maturity dates ranging from April 2025 to May 2028. Term securitization debt is expected to become due and be paid prior to the final legal maturities based on amortization of the auto loans receivable pledged as collateral. The term securitization agreements require certain funds to be held in restricted cash accounts to provide additional collateral for the borrowings or to be applied to make payments on the securitization debt. Restricted cash of consolidated VIEs under the various term securitization agreements totaled $10.5 million as of June 30, 2023, and $14.9 million as of December 31, 2022, and is included in Other Current Assets and Other Assets in our Unaudited Condensed Consolidated Balance Sheets. Auto loans receivable pledged to the term securitization debt of consolidated VIEs totaled $101.7 million as of June 30, 2023, and $151.4 million as of December 31, 2022.