Ed Lampert's love of share buybacks has the engine humming at AutoNation ( AN), the car dealership of which he is the largest owner. But some observers wonder if the fuel will prove too rich. AutoNation disclosed plans Tuesday to borrow more than $1 billion to buy back about one-fifth of its publicly traded stock, an announcement that lit a fire under the recently moribund shares. Lampert, best known for masterminding the takeover of Sears ( SHLD) by Kmart, said he will sell some of his 77 million AutoNation shares in the deal. And no wonder: The deal is a good one for shareholders. Under the offer, AutoNation will buy up to 50 million shares for $23 apiece, a 10% premium to Monday's closing price. At the same time, the company will refinance $323.5 million of its 9% senior notes due in 2008 and replace that debt with about $1.35 billion of a bank and bond facility. The transaction gave shareholders the boost they were looking for. Since the beginning of the year, shares of AutoNation were down about 5%. After Tuesday's announcement, the stock lifted $1.37, or 6.6%, to $22.26 in trading. But the leveraged share-buyback deal is enough to make some investment bankers wary. The company, though holding little debt now, will increase its net leverage to about $1.5 billion. The deal prompted Fitch to cut AutoNation's debt rating to BB+, or junk status, on Tuesday. While nobody can say with certainty whose idea the buyback was, Lampert, as the company's biggest holder, must have had a role in the decision. Lampert and his cohorts have two seats on the board, and significant lobbying power when it comes to capital redeployment decisions. His 29% ownership stake certainly helps. Thursday the company filed a document with the SEC that included a response letter from ESL, Lampert's firm. "ESL agrees to tender all of the shares (without a minimum purchase condition) into the equity tender offer," the note said. Because the company will have to pro-rate its repurchases, Lampert said he expects his percentage stake to remain unchanged.