What is the primary purpose of the new credit facilities established by CareFusion?

The primary purposes are to provide working capital, fund capital expenditures, and for other general corporate needs for CareFusion. A significant portion of the Bridge Facility's proceeds is earmarked specifically to fund a special cash distribution to Cardinal Health as part of CareFusion's spin-off.

What are the key conditions that must be met for these credit facilities to become fully available?

Key conditions include CareFusion obtaining investment-grade credit ratings from Standard & Poor's, Moody's, and Fitch; the transfer of certain assets and liabilities from Cardinal Health to CareFusion in preparation for the spin-off; securing necessary regulatory and governmental approvals; and the delivery of officer and third-party (Duff & Phelps) solvency opinions confirming CareFusion's financial stability.

What are the financial covenants CareFusion must adhere to under these new agreements?

CareFusion must maintain a consolidated leverage ratio of no more than 3.00:1.00. Additionally, it must maintain a consolidated interest coverage ratio, which starts at 3.25:1.00 and increases to 3.75:1.00 by mid-2010, demonstrating its ability to cover interest expenses.

When do these credit facilities expire, and is there flexibility in the amounts?

The primary revolving credit facility has a three-year term, while a secondary revolving credit facility has a 364-day term. The three-year facility has an option to increase by up to $30 million, subject to lender commitments.

CAH 8-K: Material Agreements & Financial Events

Summary

This Form 8-K filing by Cardinal Health, Inc. (CAH) reports on the establishment of significant credit facilities for its wholly-owned subsidiary, CareFusion Corporation, on July 1, 2009. These facilities are crucial in the context of CareFusion's planned spin-off from Cardinal Health. The company secured a three-year revolving credit facility of up to $480 million and a 364-day revolving credit facility of up to $240 million, intended for working capital, capital expenditures, and other general corporate purposes. Importantly, up to $200 million from these facilities can be used to repay a "Bridge Facility." The filing also details a $1.4 billion "Bridge Facility" agreement for CareFusion. The sole purpose of this bridge loan is to fund a special cash distribution to Cardinal Health in connection with the spin-off. Both the revolving credit facilities and the bridge facility have specific closing conditions, including obtaining investment-grade ratings for CareFusion, transfer of certain assets and liabilities, regulatory approvals, and delivery of solvency certificates and opinions. These financing arrangements, including interest rates tied to LIBOR or ABR plus applicable margins, and specific financial covenants (leverage and interest coverage ratios), are key to facilitating the separation and ongoing operations of CareFusion.

Key Highlights

1CareFusion Corporation, a Cardinal Health subsidiary, secured two revolving credit facilities totaling up to $720 million ($480 million for 3 years, $240 million for 364 days) on July 1, 2009.
2A separate $1.4 billion Bridge Facility was established for CareFusion, specifically to fund a special cash distribution to Cardinal Health related to the planned spin-off.
3Proceeds from the revolving credit facilities can be used for working capital, capital expenditures, and other lawful purposes, with a provision for up to $200 million to repay the Bridge Facility.
4Availability of these credit facilities is contingent on several closing conditions, including CareFusion receiving investment-grade ratings from major credit agencies (S&P, Moody's, Fitch).
5Other critical closing conditions include the transfer of specified assets/liabilities, regulatory approvals, and delivery of solvency certificates and a solvency opinion for CareFusion.
6The credit agreements include financial covenants requiring CareFusion to maintain a consolidated leverage ratio of no more than 3.00:1.00 and specific consolidated interest coverage ratios that increase over time.
7These facilities are structured to support the financial needs of CareFusion during and after its spin-off from Cardinal Health.

CARDINAL HEALTH INC 8-K Report, Material Agreement (Jul 6, 2009)

Summary

Key Highlights

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