8-KMaterial AgreementsFinancial EventsExhibits & Filings

MCKESSON CORP 8-K Report, Material Agreement (Nov 29, 2010)

Filed November 29, 2010For Securities:MCK

Summary

McKesson Corporation (MCK) has filed an 8-K report detailing the entry into a $2.0 billion Senior Bridge Term Loan Agreement with Bank of America, N.A. This financing is specifically intended to fund the upcoming acquisition of US Oncology Holdings, Inc., including the payment of merger consideration, repayment of US Oncology's existing debt, and associated transaction costs. The bridge loan is a one-year unsecured facility, with terms and conditions largely mirroring McKesson's existing revolving credit facility, including interest based on prime rate or LIBOR. The company anticipates refinancing this bridge debt with longer-term financing before its maturity. Key covenants in the agreement include maintaining a debt to total capitalization ratio not exceeding 56.5% and provisions for mandatory prepayments tied to certain events like asset sales or additional debt incurrence. This filing signals a significant step in McKesson's strategic growth through the acquisition of US Oncology, a move that will require substantial short-term financing.

Key Highlights

  • 1McKesson entered into a $2.0 billion Senior Bridge Term Loan Agreement to finance the acquisition of US Oncology Holdings, Inc.
  • 2The bridge loan is a one-year unsecured facility provided by Bank of America, N.A., as Administrative Agent.
  • 3Funds from the bridge loan will cover merger consideration, US Oncology's debt repayment, and transaction costs.
  • 4The loan terms are similar to McKesson's existing revolving credit facility, with interest based on prime rate or LIBOR.
  • 5The agreement includes a covenant requiring McKesson to maintain a debt to total capitalization ratio of no greater than 56.5%.
  • 6McKesson expects to refinance the bridge loan with longer-term debt before its one-year maturity.

Frequently Asked Questions

The primary purpose of the $2.0 billion bridge loan is to provide McKesson Corporation with the necessary funds to complete its acquisition of US Oncology Holdings, Inc. This includes paying the merger consideration to US Oncology's stockholders, repaying existing debt of US Oncology and its subsidiaries, and covering transaction-related expenses.

McKesson Corporation expects to refinance all or a portion of the outstanding amounts under the bridge loan agreement with longer-term debt financing prior to the end of its one-year term. This indicates the bridge loan is intended as a temporary financing solution.

The bridge loan agreement imposes several restrictions, including limitations on McKesson and its subsidiaries creating liens, engaging in mergers or consolidations, and entering into swap contracts. Crucially, it requires McKesson to maintain a debt to total capitalization ratio of no greater than 56.5% throughout the term of the loan. There are also mandatory prepayment provisions linked to certain cash proceeds from equity issuances, property losses, asset sales, or incurring new indebtedness.

While the bridge loan agreement contains terms substantially similar to McKesson's existing revolving credit facility, this specific 8-K filing focuses on the new bridge financing for the US Oncology acquisition. The company expects to replace this bridge debt with longer-term financing, which may impact its overall capital structure and future credit arrangements.