8-KMaterial AgreementsFinancial EventsExhibits & Filings

CENTENE CORP 8-K Report, Material Agreement (Feb 13, 2020)

Filed February 13, 2020For Securities:CNC

Summary

Centene Corporation (CNC) has announced the successful issuance of $2 billion in aggregate principal amount of 3.375% Senior Notes due 2030. This debt offering, conducted under Rule 144A and Regulation S, is intended to finance the redemption of the company's outstanding 4.75% Senior Notes due 2022 and 6.125% Senior Notes due 2024. The new notes carry a lower interest rate compared to the notes being refinanced, indicating a potential improvement in Centene's cost of debt. Investors should note that these new notes are senior unsecured obligations and are not guaranteed by any subsidiaries. The company has entered into a Registration Rights Agreement, obligating it to file for the registration of these notes or permit their resale, with potential penalties (additional interest) for non-compliance. The redemption provisions offer Centene flexibility in managing its debt, with varying redemption prices and a make-whole premium for early retirement before February 2025. The company also has an obligation to offer to purchase the notes under specific change of control scenarios.

Key Highlights

  • 1Centene Corporation issued $2 billion of 3.375% Senior Notes due 2030.
  • 2The net proceeds will be used to redeem outstanding 4.75% Senior Notes due 2022 and 6.125% Senior Notes due 2024.
  • 3The new notes have a lower coupon rate (3.375%) compared to the notes being redeemed (4.75% and 6.125%), suggesting a refinancing at a more favorable interest rate.
  • 4The notes are senior unsecured obligations and are not guaranteed by Centene's subsidiaries.
  • 5Centene entered into a Registration Rights Agreement, committing to register the notes or facilitate their resale, with potential additional interest payments for failure to comply.
  • 6The company has the option to redeem the notes in whole or in part at various prices and premiums, including a make-whole premium for redemptions before February 15, 2025.
  • 7A change of control event triggers an offer to purchase the notes at 101% of their principal amount.

Frequently Asked Questions

The primary purpose of this $2 billion debt issuance is to refinance Centene's existing, higher-interest debt. Specifically, the proceeds will be used to redeem all outstanding 4.75% Senior Notes due 2022 and 6.125% Senior Notes due 2024, including any applicable premiums and accrued interest.

As senior unsecured obligations, these notes rank equally with other senior indebtedness of Centene, meaning they are subordinate to secured debt. The absence of subsidiary guarantees means that the repayment of these notes relies solely on the creditworthiness and assets of Centene Corporation itself, rather than the combined assets of its subsidiaries.

If Centene fails to fulfill its obligations under the Registration Rights Agreement, which requires the company to register the notes for exchange or permit their resale under certain conditions, it will be required to pay additional interest to the holders of these notes. This is intended as a penalty to compensate investors for the inconvenience and potential illiquidity.

Centene can redeem the notes in whole or in part under several conditions. Before February 15, 2025, they can redeem them at 100% of the principal amount plus a 'make-whole' premium. After February 15, 2025, redemption prices vary, starting at 101.688% in early 2025 and decreasing over time, until February 15, 2028, after which they can be redeemed at 100% of the principal amount. Additionally, specific change of control events require Centene to offer to purchase the notes at 101% of their principal amount.