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.