O'Reilly Auto Parts 2009 Annual Report Download - page 72

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NOTE 4 — LONG-TERM DEBT AND CAPITAL LEASES
Outstanding long-term debt was as follows on December 31, 2009, and December 31, 2008, (in thousands):
December 31,
2009
December 31,
2008
Capital leases $ 11,230 $ 14,927
6 ¾% Senior Exchangeable Notes 100,718 103,568
FILO revolving credit facility 125,000 125,000
Tranche A revolving credit facility 553,800 489,200
Total debt and capital lease obligations 790,748 732,695
Current maturities of debt and capital lease obligations 106,708 8,131
Total long-term debt and capital lease obligations $ 684,040 $ 724,564
On July 11, 2008, in connection with the acquisition of CSK (see Note 2), the Company entered into its ABL Credit Agreement for a
five-year $1.2 billion asset-based revolving credit facility arranged by BA, which the Company used to refinance debt, fund the cash
portion of the acquisition, pay for other transaction-related expenses and provide liquidity for the combined Company going forward.
The ABL Credit Agreement is comprised of a five-year $1.075 billion tranche A revolving credit facility and a five-year $125 million
first-in-last-out revolving credit facility (FILO tranche) both of which mature on July 11, 2013. As part of the ABL Credit Agreement,
the Company has pledged virtually all of its assets as collateral and is subject to an ongoing consolidated leverage ratio covenant. On
the date of the transaction, the amount of the borrowing base available, as described in the ABL Credit Agreement, under the credit
facility was $1.050 billion, of which the Company borrowed $588 million. The Company used borrowings under the credit facility to
repay certain existing debt of CSK, repay the Company’s $75 million 2006-A Senior Notes and purchase all of the properties that had
been leased under the Company’s synthetic lease facility. As of December 31, 2009, the amount of the borrowing base available under
the credit facility was $1.196 billion, of which the Company had outstanding borrowings of $679 million. The available borrowings
under the credit facility are also reduced by stand-by letters of credit issued by the Company primarily to satisfy the requirements of
workers compensation, general liability and other insurance policies. As of December 31, 2009, the Company had stand-by letters of
credit outstanding in the amount of $72 million and the aggregate availability for additional borrowings under the credit facility was
$445 million. As part of the Credit Agreement, the Company has pledged substantially all of its assets as collateral and is subject to an
ongoing consolidated leverage ratio covenant, with which the Company complied on December 31, 2009. As of December 31, 2008,
the amount of the borrowing base available under the credit facility was $1.124 billion, of which the Company had outstanding
borrowings of $614 million. The available borrowings under the credit facility are also reduced by stand-by letters of credit
outstanding in the amount of $56 million and the aggregate availability for additional borrowings under the credit facility was $454
million. In the event that we should default on any covenant contained within the Credit Agreement, certain actions may be taken;
these actions include, but are not limited to, the bulleted items below:
• termination of credit extensions
• any outstanding principal amount plus accrued interest could become immediately payable
• cash collateralization of all letter of credit obligations
• litigation from lenders
At December 31, 2009, borrowings under the tranche A revolver bore interest, at the Company’s option, at a rate equal to either a base
rate plus 1.25% per annum or LIBOR plus 2.25% per annum, with each rate being subject to adjustment based upon certain excess
availability thresholds. Borrowings under the FILO tranche bore interest, at the Company’s option, at a rate equal to either a base rate
plus 2.50% per annum or LIBOR plus 3.50% per annum, with each rate being subject to adjustment based upon certain excess
availability thresholds. The base rate is equal to the higher of the prime lending rate established by BA from time to time and the
federal funds effective rate as in effect from time to time plus 1.25%, subject to adjustment based upon remaining available
borrowings. Fees related to unused capacity under the credit facility are assessed at a rate of 0.375% of the remaining available
borrowings under the facility, subject to adjustment based upon remaining unused capacity. In addition, the Company paid customary
commitment fees, letter of credit fees, underwriting fees and other administrative fees in respect to the credit facility. At December 31,
2008, the Company had borrowings of $164 million under its facilities, which were not covered under an interest rate swap agreement,
with interest rates ranging from 3.125% to 4.75%. At December 31, 2009, the Company had borrowings of $279 million under its
facilities, which were not covered under an interest rate swap agreement, with interest rates ranging from 2.50% to 4.50%.
On July 24, 2008, October 14, 2008, and November 24, 2008, the Company entered into interest rate swap transactions with Branch
Banking and Trust Company (“BBT”), BA and SunTrust Bank (“SunTrust”). The Company entered into these interest rate swap
transactions to mitigate the risk associated with its floating interest rate based on LIBOR on an aggregate of $450 million of its debt
that is outstanding under its ABL Credit Agreement, dated as of July 11, 2008. The interest rate swap transaction the Company