O'Reilly Automotive Inc.'s Proposed Senior Unsecured Notes Rated 'BBB'

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.
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