O’Reilly Auto Parts

Loan Program

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O’Reilly Auto Parts Loan Program

New O’Reilly Auto Parts nationwide credit lease loan program.  Below is a summary of one of several loan products available through Caffrey & Company, LLC.  Rates are as of October 29, 2020.

National Credit Lease Program Highlights for stand alone O’Reilly Auto Parts stores:

  • Loans from $750,000 to $10,000,000 and up
  • Multiple structures offered

Including 10 Year Fixed Rate

  • Typical rates presently ranging from 3.75% to 3.99%
  • Typical amortization: 25 years to 30 years
  • Most require a minimum down payment between 20% and 25% of the purchase.
  • Caffrey Loan Placement fee 1.0%
  • Typical recourse: 20% to 25% Limited
  • Flexible prepayment with extra 10% annual paydown allowed with no premium charged
  • Minimum remaining primary lease term: 7 Years
  • All loans assumable, with only ¼% fee
  • Optional 50-day rate lock available
  • Rate Lock—50 days from CCL acceptance and deposit submission
  • Expedited closing process targets 33—35 days, CCL to potential closing table

Background on O’Reilly:

O’Reilly Automotive, Inc. (NASDAQ: ORLY) is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States, serving both professional service providers and do-it-yourself customers. Founded in 1957 by the O’Reilly family, the Company operated 5,592 stores in 47 U.S. states and 21 stores in Mexico as of September 30, 2020.

O’Reilly’s initial public stock offering in April 1993 was well received by investors as a welcome addition to publicly traded companies in the automotive aftermarket industry. This success has continued to date.

Financial Reports for O’Reilly Automotive

To review the third quarter financial statements (for the financial period ending September 30, 2020) on O’Reilly Auto Parts click here.

Standard and Poors Global Rating (“S&P”) service issued an Investment Grade Credit Rating of BBB with a Stable outlook on May9, 2018.  S&P reiterated this same rating (BBB) with a proposed senior unsecured notes on March 25, 2020. Below are comments from S&P:

Credit Ratings for O’Reilly from S&P:

Credit ratings are important when financing O’Reilly Auto Parts stores.

SAN FRANCISCO (S&P Global Ratings) March 25, 2020–S&P Global Ratings today assigned its ‘BBB’ issue-level rating to the proposed senior unsecured notes of Springfield, MO-based O’Reilly Automotive Inc. (BBB/Stable/–). We expect the company will use the proceeds for general corporate purposes, including to repay drawings on its revolving credit facility. O’Reilly had approximately $3.9 billion of debt outstanding as of Dec. 31, 2019. O’Reilly has a strong market position as a leading national distributor and retailer of automotive aftermarket parts. The company’s highly efficient distribution network, good private label merchandise offering, and a balanced mix of do-it-yourself and do-it-for-me customers are key differentiators.

We expect O’Reilly’s operating results will be pressured over the near term as the spread of the coronavirus weighs on customer traffic and sales volumes. We believe increasing layoffs and social distancing measures to contain the spread will result in a sharp contraction in miles driven, which will likely offset any benefit from lower fuel prices. However, in our view, O’Reilly is better positioned than companies in most other retail subsectors because of the relatively nondiscretionary nature of its merchandise. The company has performed well during past economic downturns and we expect it would benefit in the event the U.S enters a recessionary period, since consumers would tend to hold on to their current vehicles longer, requiring increased maintenance.

We believe O’Reilly maintains strong liquidity and has adequate cushion in its credit metrics for the current rating and outlook. We view the proposed issuance as a prudent, proactive approach to bolstering liquidity during a time of heightened uncertainty. We also believe the company has financial flexibility to manage credit measures within our range of expectations, including through curtailing share repurchases, paring capital investments, and reducing discretionary spending.

We checked with Moody’s who also issues credit ratings for O’Reilly Automotive Inc.  As of May 16, 2019 Moody’s issued an Investment Grade Credit Rating of Baa1 with a Stable Outlook.  On April 22, 2020 Moody’s completed a periodic review of O’Reilly’s Automotive Inc.

Credit Ratings from Moody’s for O’Reilly:

O’Reilly’s Baa1 senior unsecured rating considers its formidable position in auto parts retail, credit metrics which are predictable and managed via share repurchases, and its long-standing strength in the commercial/do it for me segment, which we believe is well-insulated from online threat due to the same day delivery component. Industry fundamentals remain compelling, with used car sales (a fertile source of customers) consistently around 40 million units. O’Reilly’s stores have been deemed essential during the coronavirus pandemic and as such remain open, albeit with restrictions in place. However, as consumers are driving less, the rating reflects that O’Reilly has the liquidity in place to support any cash flow deficits or earnings weakness during the period of lower consumer demand and that its operating performance is expected to recover once the pandemic subsides.

In conclusion:

It is a combination of real estate locations, financial strength, the perceived healthy industry that provides comfort to lender seeking to make credit tenant loans for O’Reilly Automotive Inc.

For other commercial real estate interest rates for this type of loan and other see Caffrey & Company web site or contact our office.

On our web site you can read about specific loan products: www.caffreyloans.com/loan-products, offered by Freddie Mac, Fannie Mae, HUD/FHA, Commercial Mortgage Back Securities (CMBS) and other loan products. Want more details on sample interest rates for apartment check out Interest Rates for Apartment Loans also on our web site: www.caffreyloans.com/apartment-loans.

Have a question please contact
Mike Caffrey
Telephone: (913) 402-7077
[email protected]