Business Context and Reporting Period
Company: McKesson Corporation
Filing Type: Form 8-K (Current Report)
Date of Report: February 7, 2018 (Event Date)
Reporting Period: Specific event reporting regarding debt issuance on February 7, 2018, with Euro Notes issued on February 12, 2018.
Key Financial Metrics and Debt Issuance
This filing details the creation of direct financial obligations through the issuance of new debt instruments. The filing does not provide revenue, profit, cash flow, or margin data for a fiscal period.
| Instrument | Principal Amount | Currency | Interest Rate / Terms | Maturity |
|---|---|---|---|---|
| Floating Rate Notes | €250,000,000 | Euro | 3-month EURIBOR + 0.15% (min 0%) | 2020 |
| Fixed Rate Notes | €500,000,000 | Euro | 1.625% per year | 2026 |
| USD Notes | $600,000,000 | USD | 3.950% per year | 2028 |
Proceeds: The Company expects to receive approximately $917 million in aggregate net proceeds from the Euro Notes offering after estimated expenses. The USD Notes offering was expected to close on February 16, 2018.
Material Changes and Use of Proceeds
The primary material change is the increase in outstanding indebtedness to facilitate a debt refinancing strategy.
- Debt Repurchase: Net proceeds from the Euro Notes and USD Notes are intended to finance the purchase of up to $1.1 billion of the Company's outstanding notes.
- General Corporate Purposes: Remaining net proceeds, if any, will be used for working capital and general corporate purposes, including potential repayment of other debt.
Management Commentary, Risks, and Covenants
Covenants: The Indenture includes limitations on the Company's ability to create certain liens on assets, enter into sale and leaseback transactions, or consolidate/merge/sell substantially all assets, subject to exceptions.
Redemption Terms:
- Fixed Rate Notes: Redeemable in whole or in part prior to maturity at a price including accrued interest and a make-whole premium.
- Tax Events: Any series of Euro Notes may be redeemed in whole (not in part) at 100% of principal plus accrued interest if certain tax events occur.
Change of Control: If a change of control occurs and the Euro Notes are downgraded below investment grade, the Company must offer to repurchase the notes at 101% of the principal amount plus accrued interest.
Risks: The filing notes that representations and warranties in the underwriting agreements are for the benefit of the parties and may not reflect the actual state of affairs at the time of review or future dates.
Investor Verification Checklist
- Verify the closing date and final net proceeds of the $600 million USD Notes offering (expected February 16, 2018).
- Confirm the specific outstanding notes being repurchased with the $1.1 billion allocation.
- Review the impact of the new debt issuance on the Company's overall leverage ratios and liquidity position.
- Monitor the 3-month EURIBOR rate to assess the variable interest cost on the €250 million Floating Rate Notes.
- Check for any subsequent filings regarding the completion of the debt repurchase program.