Summary
This 8-K filing from AmerisourceBergen Corporation (now Cencora, Inc.) on July 21, 2014, reports a material amendment to its Receivables Purchase Agreement. Specifically, the Seventh Amendment to the agreement, dated July 17, 2014, modifies the terms of a securitization facility used to provide liquidity and funding for ongoing business needs. The primary change is an increase in the Dilution Ratio threshold, from 4.25% to 5.75%, which must be breached before an Amortization Event is triggered. This adjustment provides the company with greater flexibility in managing its accounts receivable and can potentially delay the need for accelerated repayment of funds under the facility.
Key Highlights
- 1AmerisourceBergen Corporation entered into a Seventh Amendment to its Amended and Restated Receivables Purchase Agreement on July 17, 2014.
- 2The amendment relates to a securitization facility designed to provide liquidity and funding for the company's business operations.
- 3The Dilution Ratio threshold, which triggers an Amortization Event, has been increased from 4.25% to 5.75%.
- 4This change offers greater flexibility in managing accounts receivable and potential delays in debt repayment if dilution exceeds the previous threshold.
- 5The facility is based on accounts receivable from pharmaceutical sales and related services originated by AmerisourceBergen Drug Corporation (ABDC).
- 6The securitization facility has a base limit of $950 million, with an option to increase commitments by an additional $250 million for seasonal needs.
- 7AmerisourceBergen Corporation acts as the performance guarantor for ABDC's obligations under the facility.
Frequently Asked Questions
The primary purpose of the Seventh Amendment is to provide AmerisourceBergen Corporation with increased financial flexibility by adjusting the terms of its securitization facility. Specifically, it raises the threshold for the Dilution Ratio, which can help prevent triggering an Amortization Event and thus potentially delay accelerated debt repayment.
The Dilution Ratio generally refers to the percentage of accounts receivable that are subject to disputes, returns, or other reductions. Increasing the threshold from 4.25% to 5.75% means that a larger amount of receivables can be diluted before the company faces negative consequences under the securitization agreement, such as an Amortization Event.
The securitization facility has a base limit of $950 million. Additionally, there is an option to increase the commitments from participating banks by an extra $250 million, subject to their approval, to accommodate seasonal demands during the December and March quarters.
Key parties include AmerisourceBergen Corporation (Registrant and guarantor), AmeriSource Receivables Financial Corporation (ARFC) as seller, AmerisourceBergen Drug Corporation (ABDC) as servicer, the Purchaser Agents and Purchasers, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as administrator.