Dealer Trak (TRAK) new issue 2/28/12

2/28/12 Daiwa Color: Dealer Trak (TRAK) $150m (+22.5m) 144a senior cb pricing tonight from BARC/WFC/JPM. Terms: 5yr bullet, 1.5-2% up 30-35%, prots. DealerTrack provides software to the retail automotive industry. Numbers have been improving with improving auto sales and availability of credit. This cb will be only debt (full $125m secured rev available at L+225). PF Cash = $224m, PF debt = $161m, 2.5 lev, LTM FCF +35m. We’ll use L+500 (See credit color). 90d 50/10 vol = 36/31. ADV is thin at 272k. If 75% go to hedgies on a 62d, 1.8m shares need to be shorted. We’ll use 32 vol. Theo = 99.25/101/103. Optics do nothing for us, but this is a small deal and has a new car smell. We’d expect it to do well enough on mids or better.

Dealer mgmt software & services for the automotive industry including dealers, lenders, OEMs.

PF Cash $224m

PF Debt $161m


LTM FCF $35m

Leverage 2.5x

Market cap = $1,223m

Co is largest on-line credit appl proc network in US& Canada, but w/in DMS compete against ADP & Reynolds & Reynolds, who control market. Sales & margins impacted by recession, but has been improving w/better auto sales & avail of credit. Focused on expanding # dealers & lender relationships. Liquidity good w/full $125m secured rev avail (L+225, matures 4/15). Co has been acquisitive closing 2 trans in FY 11 w/more likely to come. Our assigned spread L+500

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