Summary
Boston Scientific Corporation (BSX) filed an 8-K on August 23, 2007, reporting an amendment to its Credit Agreement originally dated April 21, 2006. The key amendment involves modifications to its Consolidated Leverage Ratio covenants, extending the timeline for reducing the ratio and providing some flexibility. Specifically, the step-down to a 3.5 to 1.0 ratio is now targeted for September 30, 2009, rather than March 31, 2008, with interim targets adjusted. Furthermore, the amendment allows for the exclusion of up to $300 million in restructuring charges and up to $500 million (in aggregate) of litigation and settlement expenses from the calculation of Consolidated EBITDA through mid-2009. This provides BSX with increased financial flexibility, particularly in managing its debt covenants amidst potential restructuring and litigation costs. The company also utilized this amendment to prepay $1 billion of its term loan, funded by cash and a receivables-backed credit facility.
Key Highlights
- 1Amendment to the Credit Agreement dated April 21, 2006, executed on August 17, 2007.
- 2Extension of the timeline for reducing the maximum permitted Consolidated Leverage Ratio.
- 3The step-down to a 3.5 to 1.0 leverage ratio is now scheduled for September 30, 2009, with adjusted interim targets.
- 4Exclusion of up to $300 million in restructuring charges from Consolidated EBITDA calculation through June 30, 2009.
- 5Exclusion of up to $500 million (net of income) in litigation and settlement expenses from Consolidated EBITDA calculation through June 30, 2009, with an aggregate cap of $1 billion.
- 6Modification of prepayment terms to be in direct order of maturity rather than pro rata.
- 7Prepayment of $1 billion of the term loan using $750 million cash and $250 million from a U.S. receivables credit facility.