DriveTime to retire some notes using $37.1 million of IPO proceeds

By Angela McDaniels

Tacoma, Wash., Feb. 2 - DriveTime Automotive, Inc. plans to use $37.1 million of the proceeds from its initial public offering of common stock to retire 12% subordinated notes due August 2013 and junior secured notes due December 2012, according to an S-1 filing with the Securities and Exchange Commission.

Specifically, the company will use $35.1 million to retire subordinated notes and junior secured notes held by Verde Investments, Inc., an affiliate of DriveTime chairman and sole shareholder Ernest C. Garcia II, and $2 million to retire junior secured notes held by president and chief executive officer Raymond C. Fidel.

The junior secured notes comprises two tranches. As of Dec. 31, there was $38.1 million principal amount of tranche A notes outstanding bearing interest at 22% and $24.0 million principal amount of tranche B notes outstanding bearing interest at 27%. Both coupons increase by 2% each year until maturity.

Verde owns $36.1 million and $24.0 million of the tranche A and tranche B notes, respectively, and Fidel owns $2 million of the tranche A notes.

In connection with the IPO, Verde has agreed to exchange an additional $100 million of subordinated notes and junior secured notes for shares of newly designated 6.5% convertible preferred stock.

The Phoenix, Ariz., company sells and finances used cars in the subprime niche.

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