Summary
Gilead Sciences, Inc. has filed an 8-K report detailing the entry into a $6.0 billion Term Loan Facility Credit Agreement. This facility is primarily intended to finance a portion of Gilead's acquisition of Kite Pharma, Inc., a significant strategic move for the company. The agreement consists of three tranches: a $1.0 billion 364-day term loan, a $2.5 billion three-year term loan, and a $2.5 billion five-year term loan. The proceeds will also be used to cover associated fees and expenses. This financing arrangement signals Gilead's commitment to the Kite Pharma acquisition, which is expected to bolster its presence in the oncology and cell therapy markets. Investors should note the structure of the debt, with varying maturities, and the absence of immediate amortization for the 364-day and three-year facilities. While the five-year facility includes phased amortization after two years, the bulk of the principal repayment is due at maturity. The unsecured nature of the facilities and the flexibility for early repayment without penalty are also key aspects for investor consideration.
Key Highlights
- 1Gilead Sciences entered into a $6.0 billion Term Loan Facility Credit Agreement on September 8, 2017.
- 2The primary purpose of the new credit facility is to finance a portion of the acquisition of Kite Pharma, Inc.
- 3The credit agreement comprises three senior unsecured term loan facilities: $1.0 billion (364-day maturity), $2.5 billion (3-year maturity), and $2.5 billion (5-year maturity).
- 4The company did not draw any funds under the facilities on the effective date.
- 5Interest rates will be based on either the Eurodollar Rate or the Base Rate plus an Applicable Margin.
- 6The 364-day and 3-year term facilities have no interim amortization, with principal due at maturity.
- 7The 5-year term facility has no scheduled amortization for the first two years, followed by quarterly payments of 2.5% of the principal, with the remainder due at maturity.