Business Context and Reporting Period
This Form 8-K was filed by AmerisourceBergen Corporation (now Cencora, Inc.) on November 13, 2015. The report details the entry into material definitive agreements to secure financing for the recent acquisition of PharMEDium Healthcare Holdings, Inc., which was completed on November 6, 2015.
Key Financial Metrics and Debt Structure
- Term Loan: Entered into a senior unsecured term loan of $1.0 billion maturing on November 13, 2020.
- Revolving Credit Facility: Amended and restated a multi-currency revolving credit facility, extending its maturity to November 13, 2020.
- Repayment Terms: The Term Loan requires quarterly principal repayments of $25 million commencing March 2016, with the remaining balance due at maturity.
- Interest Rates:
- Term Loan: Alternate base rate + 0-25 bps or LIBOR + 75-125 bps, based on credit ratings.
- Revolving Facility: Variable rates based on credit ratings (e.g., 69-110 bps over LIBOR/CDOR).
- Letters of Credit: The Revolving Facility allows for up to $50 million in letters of credit.
Material Changes and Use of Proceeds
The primary material change is the establishment of new debt instruments to refinance funding sources used for the PharMEDium acquisition. The $1.0 billion Term Loan proceeds are specifically designated to repay these funding sources. Additionally, the maturity date of the existing Multi-Currency Revolving Credit Facility was extended by approximately nine years to align with the new Term Loan maturity.
Covenants, Risks, and Management Commentary
- Covenants: Both agreements include affirmative and negative covenants, including a financial leverage ratio. Restrictions are placed on subsidiary indebtedness, liens, fundamental changes, and asset sales.
- Prepayment: The Company may prepay the Term Loan at any time without premium or penalty (subject to breakage costs) in minimum increments of $5 million.
- Events of Default: Include non-payment, covenant breaches, and bankruptcy-related events.
- Related Party Transactions: Lenders and their affiliates (including J.P. Morgan, Bank of America, and Wells Fargo) have existing relationships with the Company, providing investment banking, commercial banking, and advisory services.
Investor Verification Checklist
- Verify the specific financial leverage ratio covenant thresholds in the attached Term Loan Credit Agreement (Exhibit 10.1).
- Confirm the Company's current credit ratings from S&P, Moody's, and Fitch to determine the applicable interest rate margins.
- Review the impact of the $25 million quarterly principal payments on future cash flow projections.
- Assess the total outstanding indebtedness post-closing to ensure compliance with the new leverage covenants.