Summary
O'Reilly Automotive, Inc. (ORLY) filed a Form 8-K on October 20, 2008, reporting the execution of interest rate swap transactions on October 14, 2008. These transactions, effective October 17, 2008, were entered into with Branch Banking and Trust Company, Bank of America, N.A., and SunTrust Bank to mitigate the risk of fluctuating interest rates on an aggregate of $150 million of the Company's debt outstanding under its Credit Facility dated July 11, 2008. The swaps effectively fix the interest rate on this debt to a range between 2.99% and 3.56%, plus an applicable margin. This action demonstrates a proactive approach by O'Reilly management to manage financial risk, particularly concerning interest rate volatility in the existing credit market environment. Investors should note that while these swaps aim to provide interest rate certainty for a portion of the company's debt, O'Reilly remains ultimately responsible for all amounts due under its Credit Facility. The terms of the swaps vary by counterparty, notional amount, and expiration date, with most expiring in October 2010 and one in October 2011.
Key Highlights
- 1O'Reilly Automotive entered into interest rate swap transactions on October 14, 2008.
- 2The purpose of these swaps is to hedge against floating interest rate risk on $150 million of debt.
- 3The debt is outstanding under the Company's Credit Facility dated July 11, 2008.
- 4The interest rate swap transactions effectively fix the annual interest rate on the hedged debt to a range of 2.99% to 3.56%, plus an applicable margin.
- 5The swaps have effective dates of October 17, 2008, with expiration dates ranging from October 17, 2010, to October 17, 2011.
- 6The counterparties for these swaps include Branch Banking and Trust Company, Bank of America, N.A., and SunTrust Bank.
- 7O'Reilly remains ultimately obligated for all amounts due under the Credit Facility.