Business Context and Reporting Period
This Form 8-K Current Report was filed by McKesson Corporation on March 8, 2013. The filing discloses the entry into a material definitive agreement and the creation of a direct financial obligation through the issuance of new debt securities.
Key Financial Metrics and Debt Issuance
On March 5, 2013, the Company entered into an Underwriting Agreement to issue and sell the following notes:
- 2018 Notes: $500 million aggregate principal amount, bearing interest at 1.40% per year, maturing March 15, 2018.
- 2023 Notes: $400 million aggregate principal amount, bearing interest at 2.85% per year, maturing March 15, 2023.
Offering Details:
- Public Offering Price: 99.797% of principal for 2018 Notes; 99.878% of principal for 2023 Notes.
- Net Proceeds: Approximately $891 million after deducting underwriting discounts and estimated offering expenses.
- Interest Payments: Payable semi-annually on March 15 and September 15, commencing September 15, 2013.
- Security Status: Unsecured and unsubordinated obligations ranking equally with existing unsecured indebtedness.
Material Changes and Use of Proceeds
The primary material change is the addition of $900 million in new long-term debt. The Company intends to use the net proceeds for general corporate purposes, specifically including the repayment of borrowings outstanding under the Senior Bridge Term Loan dated December 21, 2012.
Terms, Covenants, and Risks
Redemption Provisions: The Company may redeem the Notes prior to maturity upon 30 days' notice at a price including accrued interest and a make-whole premium. No make-whole premium applies to redemptions of the 2023 Notes on or after December 15, 2022.
Covenants: The Indenture includes limitations on creating certain liens, entering into sale and leaseback transactions, and consolidating, merging, or selling substantially all assets, subject to exceptions.
Change of Control: If a change of control occurs and the Notes are downgraded below investment grade by Fitch, Moody's, and S&P within a specified period, the Company must offer to repurchase the Notes at 101% of the principal amount plus accrued interest.
Financial Statements: This filing does not contain revenue, profit, or cash flow data for the reporting period; it focuses solely on the debt transaction.
Investor Verification Checklist
- Verify the exact amount of the Senior Bridge Term Loan being repaid with the net proceeds.
- Review the full text of the Indenture (Exhibit 4.1) for specific exceptions to the negative covenants regarding liens and asset sales.
- Confirm the current credit ratings of the Company to assess the risk of the change of control repurchase provision.
- Check subsequent filings for the final closing date and actual net proceeds received.