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Pep Boys Completes Lease-Back Transaction


PHILADELPHIA — Pep Boys has closed on the sale of 22 properties for an aggregate purchase price of $77.5 million. In conjunction, the company entered into agreements to lease the properties back to be operated as Pep Boys stores, for a lease term of 15 years, with four 5-year options.

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“We are pleased to have completed this transaction, the proceeds of which, along with cash on hand, satisfied our synthetic lease purchase obligation,” said Pep Boys Chief Financial Officer Ray Arthur. “In addition, the transaction improved our liquidity by freeing up additional availability on our revolving credit facility and further demonstrates the underlying value of our remaining owned real estate.”

Proceeds from the transaction, together with cash on hand, were used to purchase, for $116.3 million, 27 store properties and two distribution centers that had been leased by the company under a master operating lease scheduled to expire on Aug. 1. Eight of the store properties purchased were sold in the announced sale lease-back transaction. The remaining 19 store properties and two distribution centers were added to the company’s balance sheet.


Since the fourth quarter of 2007, the company has completed four sale lease-back transactions on 97 store properties for aggregate proceeds of $376.7 million. The company still owns 235 of the 562 stores that it operates and four of its five distribution centers.

As a result of the termination of the master operating lease, availability on the company’s line of credit increased by $73.9 million, raising the company’s current excess availability thereunder to $233.1 million.

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