8-KAcquisitions & DispositionsMaterial AgreementsFinancial Events+2

BOSTON SCIENTIFIC CORP 8-K Report, Material Agreement (Apr 26, 2006)

Filed April 26, 2006For Securities:BSX

Summary

Boston Scientific Corporation (BSX) has filed an 8-K report detailing significant corporate events that occurred on April 21, 2006. The primary focus is the successful completion of its acquisition of Guidant Corporation, a move that will fundamentally reshape the company's market position and operational scale. This acquisition was financed, in part, through substantial new debt facilities totaling $7 billion, comprising a $5 billion term loan and a $2 billion revolving credit facility, both maturing in April 2011. An additional $700 million interim loan was also secured, due in April 2007. These financial arrangements will impact the company's leverage and future interest expenses, with terms tied to credit ratings and subject to annual amortization for the term loan. In connection with the acquisition and potential credit rating changes, Boston Scientific has also modified its existing debt. The interest rates on its 5.50% Senior Notes Due 2015 and 6.25% Senior Notes Due 2035 have been increased by 0.75%, with provisions for potential future decreases if credit ratings improve. This filing signifies a major strategic shift for Boston Scientific, involving a large-scale integration and significant financial obligations that investors will need to closely monitor.

Key Highlights

  • 1Boston Scientific Corporation completed its acquisition of Guidant Corporation on April 21, 2006.
  • 2The acquisition was financed in part by a new $7 billion credit facility, including a $5 billion term loan and a $2 billion revolving credit facility, both maturing in April 2011.
  • 3An additional $700 million interim loan was secured, due by April 21, 2007.
  • 4The interest rates on the 5.50% Senior Notes Due 2015 and 6.25% Senior Notes Due 2035 have been increased by 0.75% due to potential credit rating changes resulting from the merger.
  • 5The acquisition involved issuing approximately 577 million shares of Boston Scientific common stock and paying approximately $14.5 billion in cash to Guidant shareholders.
  • 6The new credit agreements include covenants requiring the maintenance of a minimum interest coverage ratio and a maximum leverage ratio.
  • 7Interest rates on the new loans are tied to LIBOR plus an interest margin that varies based on the company's credit ratings from Moody's, S&P, and Fitch.

Frequently Asked Questions

This 8-K filing announces the completion of Boston Scientific's acquisition of Guidant Corporation and details the significant financing arrangements put in place to facilitate this transaction, as well as modifications to existing debt.

The acquisition was financed through a combination of equity (issuance of Boston Scientific shares) and a significant cash component. The cash portion and related transaction costs were largely funded by new debt, specifically a $7 billion credit agreement (including a $5 billion term loan and a $2 billion revolving credit facility) and a $700 million interim loan.

The $5 billion term loan and the $2 billion revolving credit facility under the Credit Agreement are both due in full by April 21, 2011. The $700 million interim loan is due in full no later than April 21, 2007. The Term Loan Facility also includes annual amortization payments beginning April 21, 2008.

Boston Scientific has increased the interest rate on its 5.50% Senior Notes Due 2015 and 6.25% Senior Notes Due 2035 by 0.75%. This adjustment is a provision for potential changes in the company's credit ratings resulting from the significant impact of the Guidant acquisition, with a stipulation that rates will not fall below their original levels.