8-KMaterial AgreementsFinancial EventsOther Events+1

BOSTON SCIENTIFIC CORP 8-K Report, Material Agreement (Dec 5, 2019)

Filed December 5, 2019For Securities:BSX

Summary

Boston Scientific Corporation (BSX) has filed an 8-K report detailing a significant financing event. On December 5, 2019, the company entered into a $700 million, 364-day credit agreement, referred to as the "2019 Credit Agreement." This agreement provides a "2019 Term Loan" maturing on December 3, 2020, with interest set at LIBOR plus a 0.65% margin. The primary purpose of this new facility is to repay the outstanding balance of the Tranche 1 Loan under a previous $2.0 billion credit agreement from December 2018 and to cover associated transaction costs. The 2019 Credit Agreement includes important covenants for investors to monitor. The company must maintain a maximum leverage ratio of 3.75x. However, this ratio is temporarily increased to 4.75x for two fiscal quarters following a "Qualified Acquisition" (defined to include the recent acquisition of BTG plc or any other transaction exceeding $1 billion and designated as such), with subsequent gradual reductions over the following fiscal quarters back to 3.75x. This flexibility in leverage ratios, particularly post-acquisition, is a key consideration for financial health assessment.

Key Highlights

  • 1Boston Scientific entered into a new $700 million, 364-day credit agreement (2019 Credit Agreement) on December 5, 2019.
  • 2The new agreement provides a $700 million 364-day Term Loan maturing on December 3, 2020.
  • 3Interest rate on the new loan is set at LIBOR plus a margin of 0.65%.
  • 4The primary use of proceeds is to repay outstanding amounts under a prior $2.0 billion term loan facility and to cover transaction costs.
  • 5A key covenant requires maintaining a maximum leverage ratio of 3.75x.
  • 6The leverage ratio covenant allows for a temporary increase to 4.75x for two quarters following a 'Qualified Acquisition' (like the BTG plc acquisition), with phased reductions thereafter.

Frequently Asked Questions

The $700 million credit agreement is primarily intended to repay the remaining outstanding balance of the Tranche 1 Loan under Boston Scientific's previous $2.0 billion Term Loan Credit Agreement entered into in December 2018. It also covers related transaction costs for both the repayment and the new credit agreement.

The 364-day Term Loan provided under the 2019 Credit Agreement matures on December 3, 2020.

The most significant covenant requires Boston Scientific to maintain a maximum leverage ratio of 3.75x. However, this ratio can temporarily increase to 4.75x for two consecutive fiscal quarters following a 'Qualified Acquisition' (such as the BTG plc acquisition or any other transaction over $1 billion designated as such), with subsequent reductions over the next several quarters.

This new facility is used to refinance existing short-term debt, specifically the Tranche 1 Loan of the 2018 credit agreement. It represents a shift in the company's short-term borrowing structure rather than an increase in overall debt, though it extends the maturity of a portion of its credit.