8-KOther Events

CENTENE CORP 8-K Report, Corporate Update (Nov 12, 2019)

Filed November 12, 2019For Securities:CNC

Summary

Centene Corporation (CNC) announced on November 12, 2019, that a significant upgrade in its credit rating by S&P has triggered the termination of certain restrictive covenants across its existing senior notes due 2022, 2024, 2025, and 2026. These terminated covenants, including restrictions on "Restricted Payments," "Incurrence of Indebtedness," and "Transactions with Affiliates," will no longer apply as long as the credit rating remains at or above BBB- with a stable outlook and no defaults exist. This development provides Centene with greater financial flexibility and operational autonomy. Furthermore, the company detailed similar covenant termination provisions within the indentures for new notes to be issued in connection with its ongoing exchange offers for WellCare Health Plans, Inc. ("WellCare"). If the rating requirements are met upon the settlement of these exchange offers, these covenants will also cease to apply to the new notes. While most restrictive covenants are lifted, certain protections for noteholders, such as those related to "Change of Control," "Liens," "Merger, Consolidation or Sale of Assets" (with a minor exception), and "SEC Reports," will remain in place.

Key Highlights

  • 1S&P upgraded Centene's credit rating, leading to the termination of several restrictive covenants on existing senior notes.
  • 2Key covenants removed include those related to Restricted Payments, Incurrence of Indebtedness, and Transactions with Affiliates.
  • 3The covenant termination is contingent on maintaining a credit rating of BBB- or higher with a stable outlook by S&P and the absence of defaults.
  • 4Similar covenant termination provisions are included in the indentures for new notes related to the WellCare acquisition exchange offers.
  • 5If rating requirements are met, these covenants will also terminate for the new WellCare-related notes.
  • 6Noteholders will retain protections under covenants related to Change of Control, Liens, and Merger/Sale of Assets (with a specific financial test exception).

Frequently Asked Questions

The S&P credit rating upgrade has triggered the termination of several restrictive covenants in Centene's existing senior notes indentures. This means Centene and its restricted subsidiaries will have more flexibility regarding restricted payments, incurring new debt, and engaging in transactions with affiliates, among other areas.

The terminated covenants will not be reinstated even if Centene's credit rating subsequently falls or a default occurs. However, the termination for the new notes related to the WellCare acquisition is contingent on meeting the rating requirements at the settlement date.

Noteholders will continue to be protected by covenants related to 'Change of Control,' 'Liens,' 'Merger, Consolidation or Sale of Assets' (excluding a specific financial test within that covenant), and 'SEC Reports.' These provisions remain in place to safeguard against certain adverse events.

Centene is issuing new notes as part of the exchange offers for WellCare. The indentures for these new notes contain similar covenant termination provisions. If Centene meets the required credit rating and no default exists at the settlement of these exchange offers, these restrictive covenants will also cease to apply to the new notes.