Summary
Gilead Sciences, Inc. (GILD) filed an 8-K on September 21, 2017, primarily to report the entry into a material definitive agreement concerning the issuance of new debt instruments. The company entered into a Seventh Supplemental Indenture to facilitate the sale of a substantial amount of new notes, totaling $3.0 billion in aggregate principal. This issuance includes both floating rate notes with various maturity dates in 2018 and 2019, and fixed rate notes maturing in 2019 with a 1.850% interest rate. The key purpose of this debt issuance is to finance the cash consideration for the previously announced acquisition of Kite Pharma, Inc. The net proceeds, along with other liquidity sources, are earmarked for this significant strategic transaction. The filing also outlines the terms of the notes, including interest rates and payment schedules, and specifies that the proceeds will be held in secure, short-term investments pending the closing of the Kite acquisition. Importantly, the company will be obligated to redeem these notes if the Kite acquisition does not close by a specified date or if the merger agreement is terminated.
Key Highlights
- 1Gilead issued $3.0 billion in aggregate principal amount of new debt notes, comprising $2.0 billion in Floating Rate Notes and $1.0 billion in 1.850% Fixed Rate Notes due 2019.
- 2The primary use of proceeds from this debt issuance is to fund the cash consideration for the previously announced acquisition of Kite Pharma, Inc.
- 3The Floating Rate Notes have initial interest rates tied to Three Month LIBOR plus varying spreads (0.170% to 0.250%) depending on the maturity.
- 4The Fixed Rate Notes will pay semi-annual interest at a rate of 1.850% per annum until their maturity in September 2019.
- 5Proceeds not immediately used for the Kite acquisition will be invested in secure, short-term investments.
- 6The company faces a special mandatory redemption requirement if the Kite acquisition is not consummated by March 27, 2018, or if the merger agreement is terminated.
- 7The agreement includes standard covenants such as restrictions on secured indebtedness and sale/leaseback transactions, and requires repurchase offers upon certain change of control events.