AutoZone Inc. is preparing for a bond offering to be held on Tuesday, according to a regulatory filing. The proceeds from this offering will be allocated for general corporate purposes. The deal will be managed by BofA Securities, JP Morgan, U.S. Bancorp, and Wells Fargo, who will act as joint book-running managers.
Bond CLIQ Media Solutions Chart Highlights Net Buying of AutoZone Bonds
According to a chart from BondCliQ Media Solutions, AutoZone’s most active bonds have experienced net buying for near-term maturities and its 10-year notes over the last 10 days. Specifically, the company’s 4.75% notes that are set to mature in 2033 have seen $105 million of net buying within this period.
Fitch Ratings Assigns BBB Rating to Reflect AutoZone’s Strengths
Fitch Ratings has assigned a BBB rating to the bond offering, taking into account AutoZone’s dominant position in the auto parts retail industry, consistent sales and EBITDA growth over time, high profit margins, and stable credit metrics. Fitch acknowledges the company’s operating trajectory is backed by minimal competition from direct peers and the industry’s resilience to discount and e-commerce competition due to inventory investment requirements, a significant service component, and immediate purchase requirements.
By leveraging their leading market position and unique value proposition, AutoZone sets itself apart in the retail industry.
AutoZone’s Debt Balances Expected to Grow
According to the chart below, AutoZone currently holds $12.8 billion in outstanding debt, with $1.8 billion due to mature in 2025.
Stable Credit Metrics
Fitch, a global credit rating agency, has reported that AutoZone maintains stable credit metrics. Although the company’s EBITDAR leverage declined below 2.5 times in fiscal years 2021 and 2022 (largely due to the impact of the pandemic), it was previously closer to 2.7 times.
Significant Free Cash Flow Expected
Fitch also projected that AutoZone will generate approximately $2 billion in free cash flow per year, starting from this year onward. The company plans to utilize this excess cash flow, along with incremental borrowing, to facilitate share buybacks. Consequently, overall debt levels are expected to align with EBITDAR, allowing AutoZone to maintain its current leverage profile in the long run.
Stock Performance
As of the current year (2023) up until now, AutoZone’s stock has witnessed a modest 2% increase. Conversely, the S&P 500 has seen a more substantial gain of 18%.
Other Corporate Bond News
In other news related to corporate bonds, Ford is making progress towards achieving an investment-grade rating following Moody’s recent upgrade. This positive development has resulted in net buying of Ford bonds.