Summary
Schering-Plough Corporation (MRK) filed an 8-K on December 2, 2004, primarily to disclose amendments to its interest rate swap arrangements. The company and its counterparty bank agreed to a phased termination of existing swap contracts, involving prepayments totaling $1.9 billion as of September 30, 2004. This termination is scheduled to occur between March 30, 2005, and January 15, 2009. The amendments also adjusted credit rating triggers. The original 36-month grace period following a credit downgrade triggering termination has been extended to January 15, 2009. Additionally, a previous 10th-anniversary rating trigger was eliminated and replaced with a lower 'BBB'/'Baa2' senior unsecured debt rating requirement for termination, with termination occurring on the later of November 16, 2007, or 60 days after notice.
Key Highlights
- 1Schering-Plough has amended its interest rate swap agreements with a counterparty bank.
- 2The company and the bank have agreed to a phased termination of the swap arrangements, set to conclude by January 15, 2009.
- 3Approximately $1.9 billion in prepayments are involved in the swap arrangement as of September 30, 2004.
- 4The termination process will involve the repayment of these prepayments by the company's U.S. subsidiary and the bank's repayment of funds to Schering-Plough's foreign subsidiary.
- 5The credit rating triggers for potential termination of the swap contracts have been modified, extending the grace period and lowering the minimum rating requirement.
- 6The company has the option to accelerate scheduled terminations and associated payments for a nominal fee.
- 7The "American Jobs Creation Act of 2004" may allow for tax-advantaged repatriation of funds to finance the U.S. subsidiary's repayment obligation.