What is the primary purpose of the First Amendment to the Receivables Purchase Agreement?

The primary purpose of the First Amendment is to extend the $850 million revolving receivables purchase facility for an additional 364 days. This ensures continued access to a key funding source for Cardinal Health's working capital needs through the securitization of its trade receivables.

How does the receivables purchase facility work for Cardinal Health?

Cardinal Health's operating subsidiaries sell their trade receivables to a wholly-owned subsidiary, Cardinal Health Funding, LLC. This subsidiary then sells undivided percentage interests in these eligible receivables to financial institutions (such as Ranger, Victory, and Windmill) in exchange for cash, up to the facility limit of $850 million, subject to certain conditions and reserves.

What are some of the potential events that could terminate access to this funding facility?

Access to the facility could be terminated by 'amortization events'. These include failure to make timely payments, material misrepresentations, cross-defaults on other significant debt, breaches of covenants, failure of receivables to meet performance ratios, changes in control of the company, bankruptcy events, and importantly, if Cardinal Health's senior unsecured long-term debt ratings are downgraded below investment grade by two out of three major rating agencies (S&P, Moody's, Fitch).

Are there any other significant financial relationships mentioned with the parties involved in this agreement?

Yes, the filing notes that several financial institutions involved in the receivables purchase agreement, or their affiliates, also act as members of the lending syndicate for Cardinal Health's $1.5 billion revolving credit facility and participate in its commercial paper program. This indicates ongoing, broader banking relationships.

CAH 8-K: Material Agreements

Summary

Cardinal Health, Inc. (CAH) announced on November 18, 2008, the filing of a Form 8-K detailing a material definitive agreement. Specifically, on November 13, 2008, Cardinal Health Funding, LLC, a wholly-owned subsidiary, entered into a First Amendment to its Third Amended and Restated Receivables Purchase Agreement. This amendment is significant as it extends the $850 million revolving receivables purchase facility for an additional 364 days. This extension is crucial for the company's ongoing liquidity and working capital management, providing a continued source of funding through the sale of its trade receivables. The amendment also involved changes in certain parties to the agreement and clarified the structure of receivables sales and contributions. The company, through its subsidiaries, sells eligible trade receivables to its funding subsidiary, which then transfers interests in these receivables to various financial institutions for cash. The filing also outlines customary amortization events that could impact access to this facility, including events related to payment defaults, cross-defaults on material debt, changes in control, or rating downgrades below investment grade by major credit rating agencies. The details provided underscore the company's reliance on this facility for its financial operations and the conditions that could affect its availability.

Key Highlights

1Cardinal Health, Inc. filed an 8-K on November 18, 2008, reporting on a material definitive agreement dated November 13, 2008.
2A First Amendment was made to the Third Amended and Restated Receivables Purchase Agreement involving Cardinal Health Funding, LLC.
3The $850 million revolving receivables purchase facility has been extended by an additional 364 days.
4This facility allows the company to securitize its trade receivables for liquidity.
5The amendment includes changes in some of the participating financial institutions.
6The filing details customary events of default or termination for the receivables purchase facility, including those related to credit ratings.
7The structure involves the sale of receivables from operating subsidiaries to a financing subsidiary, which then sells interests to financial institutions.

CARDINAL HEALTH INC 8-K Report, Material Agreement (Nov 18, 2008)

Summary

Key Highlights

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