What is the purpose of issuing these new notes?

McKesson expects to use the net proceeds from this offering for general corporate purposes, which may include the repayment of debt. This indicates a focus on managing its capital structure and potentially refinancing existing obligations.

What are the key terms and risks associated with these new notes for investors?

The notes carry interest rates of 3.650% (2020 Notes) and 4.750% (2029 Notes), payable semi-annually. They are unsecured and rank pari passu with other unsecured debt. Investors should note the optional redemption feature with a 'make-whole' premium and the significant event of default trigger: a 'change of control' event coupled with a credit rating downgrade below investment grade, which would require McKesson to offer to repurchase the notes at 101% of their principal amount.

How does this debt issuance affect McKesson's financial leverage?

This issuance increases McKesson's total debt by $1.1 billion. While the stated use of proceeds includes potential debt repayment, it also signifies the company's reliance on debt financing. Investors should monitor McKesson's overall debt-to-equity ratio and its ability to service this new debt, particularly given the covenants and potential repurchase obligations.

What does the 'change of control' provision mean for investors?

The 'change of control' provision, when paired with a downgrade below investment grade by rating agencies, acts as a protective measure for noteholders. If McKesson undergoes a significant change in ownership or control and its credit rating deteriorates, it must offer to buy back the notes at a price slightly above par (101% of the principal amount), plus accrued interest. This aims to mitigate the risk for investors in such adverse scenarios.

MCK 8-K: Financial Events

Summary

McKesson Corporation (MCK) filed an 8-K on November 30, 2018, reporting the issuance of $1.1 billion in aggregate principal amount of senior notes. This offering consists of $700 million of 3.650% Notes due 2020 and $400 million of 4.750% Notes due 2029. These notes are unsecured and unsubordinated obligations of the company, ranking equally with existing and future unsecured and unsubordinated indebtedness. The net proceeds from this offering are expected to be approximately $1.092 billion, which McKesson intends to use for general corporate purposes, potentially including debt repayment. The filing also details the terms of the notes, including interest payment dates, redemption provisions with make-whole premiums, and covenants related to liens, sale and leaseback transactions, and fundamental corporate changes. Importantly, a change of control event, coupled with a downgrade below investment grade, could trigger a mandatory repurchase offer for the notes at 101% of the principal amount.

Key Highlights

1McKesson issued $1.1 billion in aggregate principal amount of senior notes.
2The offering includes $700 million of 3.650% Notes due 2020 and $400 million of 4.750% Notes due 2029.
3Net proceeds are expected to be approximately $1.092 billion.
4Proceeds are intended for general corporate purposes, including potential debt repayment.
5The notes are unsecured and rank equally with other unsecured and unsubordinated debt.
6A 'change of control' event, combined with a credit rating downgrade, can trigger a mandatory repurchase at a premium.
7The offering was conducted under McKesson's existing shelf registration statement.

MCKESSON CORP 8-K Report, Financial Obligation (Nov 30, 2018)

Summary

Key Highlights

Frequently Asked Questions