Driven Brands extends credit facility to 2030

Driven Brands Holdings Inc. (NASDAQ:DRVN), a leader in automotive repair services with a market capitalization of $2.7 billion and annual revenue of $2.34 billion, announced on Wednesday an amendment to its revolving credit facility. The agreement, initially established on February 27, 2025, extends the maturity of its $300 million credit facility to February 27, 2030. According to InvestingPro analysis, the company currently maintains a FAIR financial health score, with detailed metrics available in the comprehensive Pro Research Report.

The Charlotte, NC-based company, operating under the jurisdiction of Delaware, detailed that the extension is subject to a springing maturity provision. If more than $100 million of the company’s term loans are outstanding by September 18, 2028, and the maturity date of these loans is not extended beyond the revolving maturity date, the facility will mature on September 18, 2028. InvestingPro data shows the company’s total debt stands at $4.08 billion, with a debt-to-equity ratio of 6.58x.

As of the date of the agreement, Driven Brands reported $155 million in outstanding borrowings under the amended facility. The company intends to use any future proceeds for general corporate purposes. The credit facility is guaranteed by Driven Holdings Parent LLC and other wholly-owned domestic subsidiaries, with some exclusions.

Interest rates on the loans are pegged to the Term SOFR Rate plus a margin ranging from 2.00% to 2.25%, which varies based on the company’s Net First Lien Leverage Ratio. A commitment fee of 0.375% is also applicable to unused commitments.

The amended agreement maintains certain covenants and restrictions, limiting the ability of Driven Brands and its subsidiaries to engage in activities such as incurring additional debt, creating liens, paying dividends, and entering into certain affiliate transactions.

A springing financial maintenance covenant is also in place, requiring the company not to exceed a net first lien leverage ratio set initially at 2.00 to 1.00, which can be adjusted up to 4.75 to 1.00. This covenant comes into effect if the outstanding loans and issued letters of credit exceed 35.0% of the revolving facility commitments at the end of a fiscal quarter.

Should Driven Brands fail to comply with these covenants, or if an event of default occurs, the credit facility commitments could be terminated, and any outstanding borrowings could become due immediately.

The full text of the Amended Credit Agreement will be filed with the company’s quarterly report on Form 10-Q. This financial maneuver reflects Driven Brands’ strategic financial management and provides the company with continued operational flexibility. The information is based on a press release statement.

In other recent news, Driven Brands has announced the sale of its U.S. car wash business to Whistle Express Car Wash for $385 million. This strategic divestiture aims to streamline the company’s focus on its core operations, such as the Take 5 Oil Change brand. Driven Brands plans to use the cash proceeds primarily for debt reduction. BMO Capital Markets responded to this news by raising its price target for the company from $15 to $16, maintaining a Market Perform rating. Additionally, leadership changes are underway, with Daniel Rivera set to become President and CEO on May 9, as Jonathan Fitzpatrick transitions to the role of nonexecutive chairman. Fitzpatrick will continue as a senior advisor to support the leadership transition. In another executive update, Chief Accounting Officer Michael Beland will resign effective January 3, 2025, with CFO Michael Diamond stepping in as interim principal accounting officer. These developments are part of Driven Brands’ ongoing efforts to enhance its operational efficiency and financial strategy.

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