Business Context and Reporting Period
Company: McKesson Corporation
Filing Type: Form 8-K (Current Report)
Date of Report: December 4, 2012
Event: Entry into a Material Definitive Agreement and Creation of a Direct Financial Obligation via a public offering of senior notes.
Key Financial Metrics and Transaction Details
The filing details a debt issuance rather than operational financial results. Key metrics include:
- Total Principal Amount Issued: $900 million ($500 million in 2015 Notes + $400 million in 2022 Notes).
- Net Proceeds: Approximately $892 million after estimated expenses.
- 2015 Notes Terms: 0.95% annual interest; matures December 4, 2015; public offering price 99.897% of principal.
- 2022 Notes Terms: 2.70% annual interest; matures December 15, 2022; public offering price 99.886% of principal.
- Debt Structure: 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:
- Repaying $500 million aggregate principal amount of 5.25% Notes due March 1, 2013.
- Replenishing working capital previously used to repay $400 million aggregate principal amount of 7.75% Notes that matured on February 1, 2012.
Outlook, Risks, and Covenants
Redemption Rights: The Company may redeem the Notes prior to maturity with 30 days' notice at a price including accrued interest and a make-whole premium. No make-whole premium applies to 2022 Notes redeemed on or after September 15, 2022.
Change of Control Provision: 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.
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.
Risks: The filing notes that representations and warranties in the agreements are not categorical statements of fact and may not reflect the actual state of affairs as of the filing date.
Investor Verification Checklist
- Verify the exact net proceeds received versus the estimated $892 million.
- Confirm the successful repayment of the $500 million 5.25% Notes due March 2013 using these proceeds.
- Review the Company's current credit ratings to assess the risk of the change-of-control repurchase trigger.
- Examine the full Indenture (Exhibit 4.1) for specific exceptions to the negative covenants regarding liens and asset sales.