8-KFinancial EventsOther EventsExhibits & Filings

MCKESSON CORP 8-K Report, Financial Obligation (Feb 17, 2017)

Filed February 17, 2017For Securities:MCK

Summary

McKesson Corporation (MCK) filed an 8-K on February 17, 2017, to report on the issuance of significant new debt. The company issued €1.2 billion in Euro Notes (0.625% due 2021 and 1.500% due 2025) and £450 million in Sterling Notes (3.125% due 2029). The net proceeds from these offerings, estimated at approximately $1.8 billion, are intended for general corporate purposes, notably including the repayment of existing debt maturing in March 2017. This move signals proactive debt management and a focus on refinancing near-term obligations. In addition to the debt issuance, the filing also discloses a shareholder derivative lawsuit filed on January 31, 2017. The suit names certain directors and officers and alleges breaches of fiduciary duties related to the dissemination of misleading information and inadequate internal controls concerning controlled substance reporting practices, stemming from a prior settlement with the DEA and DOJ. This litigation adds a layer of potential risk and scrutiny for the company.

Key Highlights

  • 1McKesson issued €1.2 billion in Euro Notes (0.625% due 2021, 1.500% due 2025) and £450 million in Sterling Notes (3.125% due 2029).
  • 2The aggregate principal amount of the new debt issuance is substantial, signaling the company's financing activities.
  • 3Net proceeds of approximately $1.8 billion are expected from the offerings.
  • 4The primary use of proceeds is for general corporate purposes, including the repayment of maturing debt totaling $1.2 billion in March 2017.
  • 5The notes are unsecured and unsubordinated obligations of McKesson.
  • 6A shareholder derivative complaint was filed on January 31, 2017, against certain directors and officers concerning fiduciary duties and internal controls related to controlled substance reporting.
  • 7The company has included standard covenants and default provisions in the debt agreements, including a change of control provision triggered by a downgrade below investment grade.

Frequently Asked Questions

The primary purpose of issuing the Euro and Sterling Notes is to raise approximately $1.8 billion in net proceeds for general corporate purposes. A significant portion of these funds will be used to repay existing debt that matures in March 2017, specifically $500 million of 5.70% Notes due March 1, 2017, and $700 million of 1.29% Notes due March 10, 2017.

McKesson issued €600,000,000 of 0.625% Notes due 2021, €600,000,000 of 1.500% Notes due 2025, and £450,000,000 of 3.125% Notes due 2029. These notes are unsecured and unsubordinated obligations of the company.

A shareholder derivative complaint was filed on January 31, 2017, against certain McKesson directors and officers. The lawsuit alleges breaches of fiduciary duties related to the dissemination of allegedly misleading information and failures in internal controls concerning the company's suspicious order reporting practices for controlled substances, which was a subject of a prior settlement with government agencies.

McKesson appears to be actively managing its debt portfolio. By issuing new, potentially lower-interest debt (especially the Euro and Sterling notes with relatively low coupon rates), the company is refinancing its upcoming maturities. This proactive approach aims to ensure liquidity, manage interest expense, and potentially improve its debt maturity profile.