8-KMaterial Agreements

Cencora, Inc. 8-K Report, Material Agreement (Nov 17, 2006)

Filed November 17, 2006For Securities:COR

Summary

AmerisourceBergen Corporation (the Registrant) filed an 8-K on November 16, 2006, reporting on two material definitive agreements entered into on November 14, 2006. The primary event is the establishment of a new $750 million multi-currency revolving credit facility. This new facility, maturing in November 2011, replaces three existing senior unsecured revolving credit facilities totaling approximately $858 million that were set to expire in 2009. The new credit agreement provides flexibility for general corporate purposes, investments, and acquisitions, with interest rates tied to the company's debt ratings and market benchmarks like LIBOR and prime rates. In addition to the credit facility, the company also entered into the Fifth Amendment to its Receivables Purchase Agreement. This amendment extends the maturity date of its accounts receivable securitization facility by three years to November 13, 2009. While the facility size was reduced from $700 million to $500 million, it includes an accordion feature to potentially increase it to $750 million. These actions indicate a strategic move to refinance existing debt, potentially lower borrowing costs, and enhance financial flexibility for future growth.

Key Highlights

  • 1Established a new $750 million multi-currency revolving credit facility maturing on November 14, 2011.
  • 2The new credit facility replaces three prior senior unsecured revolving credit facilities totaling approximately $858 million.
  • 3Borrowing costs are variable, based on the company's debt ratings (ranging from 0.19% to 0.60% over LIBOR/EURIBOR/CDOR) and market rates.
  • 4Funds from the new credit facility can be used for general corporate purposes, investments, and acquisitions.
  • 5Extended the maturity date of the accounts receivable securitization facility by three years to November 13, 2009, via a Fifth Amendment.
  • 6Reduced the size of the receivables securitization facility from $700 million to $500 million, but added an accordion feature allowing it to increase to $750 million.
  • 7The new credit agreement is guaranteed by substantially all of AmerisourceBergen's U.S. subsidiaries.

Frequently Asked Questions

The main purpose is to refinance existing debt and enhance the company's financial flexibility. The new credit facility replaces older credit lines with a larger, more flexible facility, while the amendment to the receivables agreement extends its term and adjusts its structure.

The new facility is for $750 million, compared to the previous total of approximately $858 million. It has a longer maturity (November 2011 vs. 2009 expiration for old facilities) and offers multi-currency options. Interest rates are tied to the company's debt ratings, implying potential for lower costs if ratings improve.

The facility's maturity is extended by three years to November 2009. Although the total size is reduced to $500 million from $700 million, the addition of an accordion feature allows it to expand up to $750 million, providing flexibility for seasonal needs or growth.

These agreements suggest proactive financial management. The refinancing could lead to lower interest expenses, improved liquidity, and greater capacity for strategic investments or acquisitions, potentially driving future growth and shareholder value. The extended maturities also provide greater stability.