Lithia Motors gets $200 million line of credit

Lithia Motors said Monday it has a new $200 million, three-year revolving syndicated credit line that will carry forward to October 2014.

The revolving credit line with US Bank and JPMorgan Chase Bank provides $100 million for new vehicle inventory and $100 million that could fuel acquisitions.

Based on current borrowing levels, pretax interest expenses related to financing inventory will decline by approximately $250,000 per quarter, Lithia said.

The new agreement replaces a former credit line that provided $75 million for acquisitions, said John North, vice president of finance and the company's controller.

"It doesn't change anything from a strategy perspective," North said. "It just makes it easier to buy (dealerships) if we find something compelling. We're still looking for opportunities, but we're trying to be prudent."

Medford-based Lithia Motors is the ninth-largest automotive retailer in the country, operating 86 dealerships in 12 states. Although those totals are far less than four years ago, Lithia has rebounded along with many of the industry's major players.

Lithia Motors accounted for 13 percent of the acquisitions by publicly traded auto retailers during the first seven months of the year, a period when that group collectively spent $411 million on acquisitions — an increase of 92 percent from their total in all of 2010 — according to an August report by San Francisco consultant Presidio Group.

The $53.3 million cash Lithia paid for Mercedes-Benz of Portland, Mercedes-Benz of Wilsonville and Rasmussen BMW/MINI in Portland may well be a prelude to future moves, said Alan Haig, a managing director of Presidio Group.

"Two Mercedes and the BMW-MINI dealerships definitely reflect interest in luxury dealerships," Haig said. "It was in their core market, seems like a good fit and diversifies Lithia. They're getting themselves prepared for growth, although they don't have to use that capital. When they are ready to buy, they are properly capitalized."

In the Presidio Group's most recent mergers and acquisitions report, BMW dealerships were the most in demand among buyers through July. BMW stores are valued at six to eight times net pretax earnings, while Mercedes-Benz were going for six to 7.5 times net pretax earnings.

There's been nothing to suggest a change in the market in recent months, Haig said.

"There haven't been any big acquisitions announced lately," he said. "But there should be one or two soon. The overall trends are still solid, dealers are expecting a nice lift in sales during the fourth-quarter and 2012 should be a bit stronger than 2011."

Greg Stiles is a reporter for the Mail Tribune. Reach him at 541-776-4463 or email

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