Sonic Seeks To Avoid Bankruptcy

Payment on Sonic debt coming due
$105.3 million is scheduled to be paid on Thursday by the auto-dealer chain.

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Sonic Automotive, one of the nation's largest auto dealers, faces a credit deadline and a big debt payment this week as it tries to avoid bankruptcy in a recession that has severely curbed car sales.

With $105.3 million due Thursday – of roughly $1.5 billion in debt scheduled to mature this year and next – Charlotte-based Sonic has been working with bondholders on addressing the debt without crippling the Fortune 500 company.

In its last earnings report, which was released March 31 after two delays, Sonic said filing for bankruptcy protection was a possibility if didn't restructure debt or obtain additional financing.

In that report, the company said it had extended a credit agreement through today. While he declined to share specifics, Scott Smith – Sonic's president and chief strategic officer – said Friday he expects the credit agreement and debt payment issues to be resolved before this week's deadlines.

“We've got a lot of good news,” Smith said. “…I would not anticipate the need for any additional extensions.”

Sonic officials have said the looming debt is mostly because of bad timing. The recession has frozen credit markets in which the company normally would be able to restructure debt, they say.

Regardless, Sonic reported a fourth-quarter loss of $685.6 million, compared with a $23 million profit a year earlier. While that number is staggering, Smith has said the loss wasn't in operations but in assets that now are worth much less than what Sonic paid.

Founded by Smith and his father, Bruton Smith – also the company's chairman and CEO – Sonic Automotive has about 9,100 employees and 164 franchises in 15 states.

The company's stock has performed better in recent weeks. After closing below $1 in early March and losing about 90 percent of its value over previous year, shares closed Friday at $5.58, its highest price in nearly seven months.

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