Summary
O'Reilly Automotive, Inc. (ORLY) filed an 8-K on July 29, 2008, reporting the execution of interest rate swap transactions on July 24, 2008. These transactions were entered into to mitigate the risk of fluctuating interest rates on $250 million of the company's debt outstanding under its Credit Facility. The swaps effectively fix the interest rate on this portion of the debt, providing greater certainty in interest expense. Investors should note that while these swaps are designed to manage interest rate exposure, the company remains ultimately responsible for all payments due under its Credit Facility. The report details the counterparties (Branch Banking and Trust Company, Bank of America, N.A., and SunTrust Bank), the notional amounts, effective dates, maturity dates, and the fixed rates for these swap agreements. This move reflects a proactive approach to managing financial risk in the prevailing economic environment.
Key Highlights
- 1O'Reilly Automotive entered into interest rate swap agreements on July 24, 2008.
- 2The total notional amount covered by these swaps is $250 million.
- 3The purpose of these swaps is to mitigate the risk of floating interest rates (LIBOR-based) on the company's debt.
- 4The swaps are linked to the company's Credit Agreement dated July 11, 2008.
- 5The effective date for the swaps is August 1, 2008, with maturity dates ranging from August 1, 2010, to August 1, 2011.
- 6The fixed interest rates effectively set by the swaps are 3.425% (for $100M) and 3.83% (for $150M), plus any applicable margin under the Credit Facility.
- 7The company remains ultimately obligated for all payments under the Credit Facility, regardless of the swap terms.