February 09, 2000 12:10
Rent-A-Wreck Authorizes Up to 1 Million Shares Buyback
OWINGS MILLS, Md--(BUSINESS WIRE)--Feb. 9,2000--Rent-A-Wreck of America, Inc. (NASDAQ - RAWA) - announced today that its Board of Directors had authorized the repurchase and retirement by the Company of up to 1 million shares of common stock, convertible cumulative series A preferred
stock, options or warrants.
All of Rent-A-Wreck's previously authorized repurchases and retirements, aggregating 1,519,075 shares since June 1995, had been completed.
The Board reached an agreement with K.A.B., Inc. to extend the term of its Management Agreement with the Company for five additional years through June 30, 2008 on its present terms. The Board also authorized the repurchase of 500,000 options at $1.25 per option, representing half of the total new buyback authorization.
These options are all held by Kenneth L. Blum, Jr., the Company's President/COO and by Robin Cohn, are exercisable at $1.15 per share, and expire June 30, 2003.
Although it does not believe it will be so constrained, the Company could be constrained from purchasing some or all of the 500,000 options by covenants of its bank agreement pursuant to which the Company finances its Bermuda-based reinsurance subsidiary.
Consequently, the sellers have agreed that the transaction will close, without interest, only at such time or times as the Company can make the purchases without restrictions.
The Company presently believes at least a substantial portion of the options may be purchasable once its audited results for the current fiscal year, which ends March 31, 2000, are known, with any balance most likely closing once unaudited results for the quarter ending June 30, 2000, are known.
Management believes the option repurchase to be beneficial to the Company in two respects. First, by buying options rather than shares, the Company will be able to reduce its dilution by a far greater amount for fewer dollars than it would cost to acquire the same number of outstanding shares.
Second, options represent taxable income to the holder upon exercise (and an offsetting tax deduction to the Company).
By purchasing the options directly, the Company may obtain a tax deduction and also avoids any overhang of shares that have to be sold on the market.
Those who would like additional information about Rent-A-Wreck are welcome to visit its continually updated website at rentawreck.com.
CONTACT: Rent-A-Wreck of America, Inc.
Mitra Ghahramanlou, Chief Accounting Officer,
800/421-7253 x 143
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