01—Abstract
Summary
Summary of the 8-K filed September 10, 2024. Cited figures are marked; the original filing is the authoritative source.
On September 10, 2024, McKesson Corporation (MCK) closed a $500 milliona offering of 4.250% senior unsecured notes due September 15, 2029, under its February 2023 indenture and an automatic shelf registration on Form S-3.
The notes were priced at 99.946% of par, a yield to maturity of 4.262% (a spread of +72 bps over the 3.625% UST due August 2029). Net proceeds were approximately $498.0 millionb before offering expenses. McKesson plans to use the proceeds, together with cash on hand, to redeem all of its outstanding 5.250% notes due February 15, 2026, at 100% of principal plus accrued interest.
The filing does not state the outstanding principal of those 2026 notes, so the size of the redemption is not disclosed. The transaction is primarily a liability management action. It refinances a 2026 maturity with a longer-dated 2029 note and extends McKesson's debt maturity profile.
The new notes carry a make-whole call at Treasury plus 15 bps until August 15, 2029, and a par call thereafter. The indenture includes customary covenants limiting certain liens, sale-leaseback transactions, and consolidations or mergers or sales of substantially all assets, subject to exceptions. Holders also have a change-of-control put at 101%c of principal, but only if a change of control and a ratings downgrade below investment grade by all rating agencies occur together.
For investors, the key points are that the notes rank equally with McKesson's other unsecured, unsubordinated debt, and that the company's expected ratings (A3 / BBB+ / A-, all stable) are unchanged by this filing. The disclosure shows a modest increase in the coupon relative to the 2026 notes being retired, but it adds no new leverage beyond the principal amount. The filing does not include updated financial results or guidance, so investors should look to McKesson's periodic reports for the broader credit picture.
02—Key points
Key Highlights
- Issued $500 million of 4.250% senior unsecured notes due September 15, 2029, on September 10, 2024, under the February 2023 indenture and an S-3 automatic shelf registration
- Priced at 99.946% of par with a 4.262% yield to maturity, +72 bps over the 3.625% UST due August 2029; net proceeds of about $498.0 million before expenses
- Proceeds plus cash on hand will fund the redemption of all outstanding 5.250% notes due February 15, 2026, at 100% of principal plus accrued interest; the outstanding amount of those notes is not disclosed
- Optional redemption: make-whole at Treasury plus 15 bps before August 15, 2029, and at par thereafter
- Covenants restrict certain liens, sale-leaseback transactions, and consolidation, merger, or sale of substantially all assets, subject to exceptions
- Change-of-control put at 101% applies only on a double trigger: a change of control plus a downgrade below investment grade by all rating agencies within a specified period
- Expected ratings of A3 (Moody's), BBB+ (S&P), and A- (Fitch), all stable; Citigroup, HSBC, and U.S. Bancorp Investments acted as representatives of the underwriting syndicate
03—Questions
Frequently Asked Questions
Why did McKesson issue $500 million of new notes?
The company is using the proceeds, together with cash on hand, to redeem all of its 5.250% notes due February 15, 2026. Issuing 2029 notes to retire 2026 notes extends the maturity profile. The filing does not describe any additional strategic purpose, such as acquisitions or capital returns.
How does the new debt affect McKesson's leverage?
Because the new notes are used to retire a similar amount of 2026 notes, total debt should be roughly unchanged, subject to the amount of 2026 notes outstanding, which the filing does not disclose. The filing does not include updated balance sheet or leverage figures, so investors should check McKesson's latest quarterly report for the current debt balance.
What protections do bondholders have?
The notes are unsecured and rank equally with McKesson's other unsecured, unsubordinated debt. Covenants limit certain liens, sale-leaseback transactions, and mergers or sales of substantially all assets, subject to exceptions in the indenture. Holders receive a 101% put only if both a change of control and a downgrade below investment grade by all rating agencies occur within a specified period.
When can McKesson redeem the notes early, and at what cost?
Before August 15, 2029, McKesson can redeem the notes at a make-whole price based on the Treasury rate plus 15 basis points, plus accrued interest. On or after August 15, 2029, the notes can be redeemed at par plus accrued interest. Redemption requires 10 to 60 days' notice to holders.
What are the key dates and payment terms?
The notes bear interest at 4.250% per year, paid semi-annually on March 15 and September 15, beginning March 15, 2025. They mature on September 15, 2029. The notes settled on September 10, 2024, and the Treasury benchmark and spread indicate a 4.262% yield to maturity at issuance.
04—Continue