CHARLOTTE, N.C. - Driven Brands Holdings Inc. (NASDAQ: DRVN), a leading automotive services company, has successfully closed a securitization offering with its subsidiaries, securing $675 million in funding through two series of senior secured notes. The transaction includes $275 million of Series 2024-1 Fixed Rate Senior Secured Notes, Class A-2, with a maturation date in October 2054 and an anticipated repayment date in October 2031.
The A-2 Notes, which carry a coupon rate of 6.3%, will be used to refinance existing debt, specifically the Company's Series 2018-1 Class A-2 Fixed Rate Senior Secured Notes, and to cover transaction-related expenses and general corporate purposes.
In addition, Driven Brands increased its liquidity by adding $400 million of Series 2024-1 Class A-1 Notes, which replaced the undrawn $135 million Series 2019-3 Class A-1 Notes. As of closing, the A-1 Notes were undrawn, providing the Company with additional financial flexibility.
The offering was structured as a whole business securitization through Driven Brands Funding, LLC and Driven Brands Canada Funding Corporation. This marks the eleventh such issuance by Driven Brands. Both the A-1 Notes and A-2 Notes have received BBB ratings from Kroll Bond Rating Agency and BBB- ratings from S&P Global Ratings, aligning with the ratings given to the Series 2022-1 Fixed Rate Senior Secured Notes, Class A-2, that closed in October 2022.
The A-2 Notes have not been registered under the Securities Act of 1933 or any state securities laws and were offered exclusively to qualified institutional buyers and to non-U.S. persons outside the United States. This press release does not constitute an offer to sell or a solicitation of an offer to buy any securities.
Driven Brands, headquartered in Charlotte, NC, operates the largest network of automotive service centers in North America, with over 5,000 locations in 13 countries. The company's portfolio includes recognized brands such as Take 5 Oil Change®, Take 5 Car Wash®, Meineke Car Care Centers®, and CARSTAR®, serving roughly 70 million vehicles annually and generating about $2.3 billion in annual revenue from $6.4 billion in system-wide sales.
In other recent news, Driven Brands has been experiencing several significant developments. The company reported a modest revenue increase of 1.7% year-over-year in its Q1 2024 earnings call, aided by the addition of 144 net new stores and a 0.7% growth in same-store sales. However, BMO Capital, RBC Capital, and Piper Sandler have all lowered their price targets for Driven Brands to $14.00, citing reasons such as the recent departure of the CFO and challenges in the car wash and glass sectors.
Despite the lowered price targets, these firms maintain positive ratings on Driven Brands, acknowledging the company's potential for growth. RBC Capital revised its revenue growth estimates for Driven Brands for full-year 2024 to 3.4% and for full-year 2025 to 8.0%. The firm also set its adjusted EBITDA estimates at $553 million for full-year 2024 and $608 million for full-year 2025.
InvestingPro Insights
As Driven Brands Holdings Inc. (NASDAQ: DRVN) secures a substantial securitization offering, it's important for investors to consider the company's financial health and market standing. With a market capitalization of $2.11 billion, the automotive services leader is navigating a competitive landscape. The latest data from InvestingPro shows a mixed financial picture as of Q1 2024, with a negative P/E ratio of -2.74 and an adjusted P/E ratio for the last twelve months of -43.87, indicating that the company is currently not profitable.
On a more positive note, Driven Brands has demonstrated resilience in revenue growth, with an 8.76% increase over the last twelve months as of Q1 2024 and a quarterly growth of 1.74%. This is a testament to the company's robust operational model and its ability to generate sales amidst challenging market conditions. The gross profit margin stands at a healthy 40.82%, showcasing the company's efficiency in managing its cost of goods sold.
InvestingPro Tips suggest that investors should keep an eye on revenue and profit margins as indicators of the company's operational effectiveness. Additionally, the disparity between the company's fair value estimations—$15 USD according to analyst targets and $11.53 USD by InvestingPro—can offer insights into market expectations and valuation perspectives. For those interested in a deeper dive into Driven Brands' financials and strategic positioning, InvestingPro offers additional tips. With the promo code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking access to an extensive array of investment analysis tools and insights.
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