Summary
Boston Scientific Corporation (BSX) announced a significant financial maneuver on June 23, 2010, by entering into a new $3,000,000,000 senior unsecured credit facility. This facility consists of a $1,000,000,000 term loan and a $2,000,000,000 revolving credit facility, maturing in June 2013 with extension options. The primary purpose of this new credit facility is to proactively manage its debt obligations. Specifically, the company intends to use the term loan proceeds to fully pre-pay its $900,000,000 term loan due to Abbott Laboratories in April 2011. Additionally, a portion of the revolving credit facility, combined with existing cash, will be used to repay $850,000,000 of senior notes maturing in early 2011. This strategic refinancing aims to reduce near-term debt maturities and improve the company's overall liquidity position.
Key Highlights
- 1Boston Scientific secured a new $3 billion senior unsecured credit facility, comprising a $1 billion term loan and a $2 billion revolving credit facility.
- 2The new facility matures on June 23, 2013, with potential for two one-year extensions.
- 3Proceeds from the term loan will immediately pre-pay the $900 million term loan due to Abbott Laboratories in April 2011.
- 4The revolving credit facility will help fund the repayment of $850 million in senior notes maturing in January and June 2011.
- 5Interest rates on borrowings are tied to LIBOR plus a margin, which varies based on the company's credit ratings (currently LIBOR + 2.75% for the term loan and LIBOR + 2.25% for revolving credit).
- 6The credit agreement includes financial covenants requiring a minimum interest coverage ratio of 3.0x and a maximum leverage ratio of 3.85x (or 3.5x thereafter) based on EBITDA, with specific exclusions for litigation and restructuring charges.
- 7The company terminated its prior credit agreement dated April 21, 2006, in conjunction with entering into the new facility.