Business Context and Reporting Period
Company: McKesson Corporation
Filing Type: Form 8-K (Current Report)
Date of Report: February 16, 2018
Event: Issuance of $600 million aggregate principal amount of 3.950% Notes due 2028.
Key Financial Metrics
- Debt Issuance: $600,000,000 principal amount of 3.950% Notes due 2028.
- Interest Rate: 3.950% per year, payable semi-annually (February 16 and August 16).
- Net Proceeds: Approximately $595 million after estimated expenses.
- Public Offering Price: 99.975% of principal amount.
- Debt Structure: Unsecured and unsubordinated obligations ranking equally with existing unsecured indebtedness.
Material Changes and Use of Proceeds
The filing details a material change in the Company's capital structure through the issuance of new long-term debt. The Company intends to use the net proceeds from this offering, combined with proceeds from recently completed issuances of Floating Rate Notes due 2020 and 1.625% Notes due 2026, to finance the purchase of up to $1.1 billion of certain outstanding notes. Any remaining net proceeds will be used for working capital and general corporate purposes, including potential debt repayment.
Terms, Risks, and Contingencies
- Redemption: The Company may redeem the Notes prior to maturity with a make-whole premium upon 15 to 45 days' notice.
- Change of Control: In the event of a change of control and a subsequent downgrade of the Notes below investment grade, the Company must offer to repurchase the Notes at 101% of the principal amount plus accrued interest.
- Covenants: The Indenture includes limitations on creating liens, entering into sale and leaseback transactions, and consolidating or merging assets, subject to exceptions.
- Default Provisions: The Indenture contains customary events of default.
Investor Verification Checklist
- Verify the exact amount of outstanding notes purchased with the $1.1 billion allocation.
- Confirm the impact of the new debt issuance on the Company's overall leverage ratios.
- Review the specific terms of the "make-whole premium" for early redemption in the Officer's Certificate (Exhibit 4.1).
- Monitor the Company's credit rating status relative to the change of control repurchase trigger.