8-KMaterial AgreementsFinancial EventsShareholder Matters+1

O REILLY AUTOMOTIVE INC 8-K Report, Material Agreement (Apr 11, 2017)

Filed April 11, 2017For Securities:ORLY

Summary

O'Reilly Automotive, Inc. (ORLY) has announced the entry into a new $1.2 billion senior unsecured revolving credit facility, effective April 5, 2017, which matures in April 2022. This facility replaces their prior credit agreement and is a significant development for the company's liquidity and financial flexibility. A key feature is the uncommitted incremental facility, allowing for potential increases up to $600 million, bringing the total to $1.8 billion under certain conditions. This new credit facility does not include any subsidiary guarantors, which has led to the automatic release of existing subsidiary guarantees on the company's $1.9 billion in outstanding senior notes. This change impacts the security structure for noteholders and is an important consideration for investors monitoring the company's debt profile and risk. The agreement includes standard covenants and events of default, and interest rates are tied to the company's debt ratings, indicating a focus on maintaining strong creditworthiness.

Key Highlights

  • 1ORLY entered into a new $1.2 billion senior unsecured revolving credit facility, maturing in April 2022.
  • 2The new facility replaces the previous credit agreement dated January 14, 2011.
  • 3The facility includes an uncommitted incremental option to increase borrowing capacity by up to $600 million, to a potential total of $1.8 billion.
  • 4None of O'Reilly's subsidiaries are guarantors or obligors under the new Credit Agreement.
  • 5As a result, subsidiary guarantees on the Company's $1.9 billion in outstanding senior notes have been automatically released.
  • 6Interest rates on borrowings are variable, based on the company's debt ratings from Moody's and S&P, ranging from 0.000% to 1.250% plus a margin.
  • 7The agreement includes customary affirmative and negative covenants, financial covenants (fixed charge coverage and leverage ratios), and events of default.

Frequently Asked Questions

The new Credit Agreement establishes a significant $1.2 billion revolving credit facility that enhances O'Reilly Automotive's financial flexibility and liquidity. It replaces their previous credit arrangement and provides borrowing capacity for general corporate purposes.

Since no subsidiaries are guarantors under the new credit facility, their previous guarantees on O'Reilly's $1.9 billion in outstanding senior notes have been automatically released. This means the senior notes are now effectively unsecured with respect to those subsidiary guarantees.

Interest rates are variable and depend on O'Reilly's credit ratings from Moody's and Standard & Poor's. The rates are determined by a margin added to either an Alternate Base Rate or an Adjusted LIBO Rate (Eurodollar Rate), with margins varying based on the assigned debt ratings.

The uncommitted incremental facility allows O'Reilly to potentially increase the credit facility by up to $600 million, subject to certain conditions. This provides flexibility to access additional capital if needed, potentially raising the total facility size to $1.8 billion.