8-KOther Events

Cencora, Inc. 8-K Report, Corporate Update (Dec 21, 2017)

Filed December 21, 2017For Securities:COR

Summary

Cencora, Inc. (formerly AmerisourceBergen Corporation) filed an 8-K on December 20, 2017, detailing amendments to its credit facilities and securitization agreements. The primary focus is the amendment to its Revolving Credit Facility and Term Loans, which modifies the definition of "Consolidated EBITDA" to add back significant reserves previously taken by the company. These reserves relate to a $625 million provision for a potential settlement with the U.S. Attorney's Office for the Eastern District of New York (USAO-EDNY) concerning civil claims under the Federal False Claims Act, and a $260 million payment made to resolve misdemeanor charges related to the Federal Food, Drug, and Cosmetic Act. These amendments are significant for investors as they adjust the financial covenants tied to the company's debt agreements. By adding back these previously recognized liabilities and settlements to the EBITDA calculation, the company may improve its ability to meet financial covenants, potentially impacting its borrowing capacity and overall financial flexibility. The filing also notes minor amendments to a securitization facility to align with the credit agreement changes. Investors should note that these are accounting adjustments to covenants and do not alter the underlying cash impact of the settlements.

Key Highlights

  • 1Amendment to Revolving Credit Facility and Term Loans executed on December 18, 2017.
  • 2Definition of "Consolidated EBITDA" in credit agreements has been amended.
  • 3The amendment allows for the add-back of a $625 million reserve related to civil False Claims Act settlement.
  • 4The amendment also allows for the add-back of a $260 million payment related to a misdemeanor violation of the Federal Food, Drug, and Cosmetic Act.
  • 5These add-backs are intended to adjust financial covenants tied to the company's debt.
  • 6Amendments were made to a Receivables Purchase Agreement and a Performance Undertaking to align with credit agreement changes.
  • 7The filing refers to prior disclosures regarding these matters in the company's Form 10-K for the fiscal year ended September 30, 2017.

Frequently Asked Questions

The primary impact is that the company can now exclude the $625 million reserve for the False Claims Act settlement and the $260 million payment for the Food, Drug, and Cosmetic Act violation from its "Consolidated EBITDA" calculation. This adjustment is crucial for maintaining compliance with financial covenants within its credit agreements.

No, this amendment does not affect the actual cash outflow or the underlying resolution of the legal matters. The reserves and payments have already been accounted for. This is purely an accounting adjustment to the definition of a financial metric used for covenant calculations in debt agreements, aimed at preserving financial flexibility.

The company amended its credit agreements to modify the calculation of "Consolidated EBITDA." This was likely done to ensure that the company remained in compliance with its debt covenants, given the significant reserves and payments related to legal settlements that had been recognized.

The 8-K also notes amendments to a securitization facility (Receivables Purchase Agreement and Performance Undertaking). These changes were made to conform to the amendments in the Revolving Credit Agreement and involved other technical adjustments.