CHICAGO -- Car dealership owner Asbury Automotive Group Inc. on Tuesday said it believes it is no longer in default of a loan covenant after obtaining financing for two real estate projects.
Asbury's stock fell more than 9 percent on Tuesday after Salomon Smith Barney cut its investment rating on the shares to "underperform" from "outperform," citing a bank covenant default.
Asbury said the covenant default occurred when it failed to meet certain loan ratio requirements as of Dec. 31 and would not have happened if it had received the financing for the two real estate projects by year end.
The Stamford, Connecticut-based company said the default had no material impact on its day-to-day operations, and lenders recently approved the acquisition of two dealerships for a total of $40 million. It expects the deals are expected to close early in the second quarter.
"Our liquidity position remains excellent, and we ended the first quarter with a significant amount of cash on hand," Asbury Chief Executive Kenneth Gilman said in a statement.