Aetna 2015 Annual Report Download - page 139

Annual Report- Page 133
In March 2014, we entered into two interest rate swaps with an aggregate notional value of $500 million. We
designated these swaps as cash flow hedges against interest rate exposure related to the forecasted future issuance
of fixed-rate debt to be primarily used to refinance long-term debt maturing in 2017. On September 30, 2015, we
modified the timing of the forecasted future issuance of fixed-rate debt in conjunction with the expected timing of
the financing of the Proposed Acquisition and, as a result, we de-designated these swaps and re-designated them as
cash flow hedges against interest rate exposure related to the forecasted future issuance of fixed-rate debt. The
effective portion of the hedge loss of $73 million pretax remains in accumulated other comprehensive loss, net of
tax, and will be amortized as an increase to interest expense over the first 20 semi-annual interest payments related
to the fixed-rate debt. There was no material ineffectiveness as a result of the effectiveness test completed upon de-
designation. At December 31, 2015, the re-designated swaps had a pretax fair value gain of $4 million, which was
reflected net of tax in accumulated other comprehensive loss within shareholders’ equity.
Revolving Credit Facility
On March 27, 2012, we entered into an unsecured $1.5 billion five-year revolving credit agreement (the “Credit
Agreement”) with several financial institutions. On September 24, 2012, in connection with the acquisition of
Coventry, we entered into a First Amendment (the “First Amendment”) to the Credit Agreement and also entered
into an Incremental Commitment Agreement (the “Incremental Commitment Agreement”). On March 2, 2015, we
entered into a Second Amendment to the Credit Agreement (the “Second Amendment”). On July 30, 2015, in
connection with the Proposed Acquisition, we entered into a Third Amendment (the “Third Amendment,” and
together with the First Amendment, the Incremental Commitment Agreement, the Second Amendment and the
Credit Agreement, resulting in the “Facility”). The Facility is an unsecured $2.0 billion revolving credit agreement.
The Third Amendment permits us to increase the commitments available under the Facility from $2.0 billion to $3.0
billion upon our request and the satisfaction of certain conditions, including the completion of the transactions
contemplated by the Merger Agreement and the termination of Humana’s existing credit agreement dated as of July
9, 2013 (“Humana’s Existing Credit Agreement”). The Third Amendment also modified the calculation of total
debt for the purposes of determining compliance prior to the Closing Date (as defined below) with certain
covenants to exclude debt incurred by us to finance the Proposed Acquisition, the other financing transactions
related to the Proposed Acquisition and/or the payment of fees and expenses incurred in connection therewith so
long as either (A) the net proceeds of such debt are set aside to finance the Proposed Acquisition, the other
financing transactions related to the Proposed Acquisition and/or the payment of fees and expenses incurred in
connection therewith or (B) such debt is subject to mandatory redemption in the event that the Merger Agreement is
terminated or expires.
In addition, upon our agreement with one or more financial institutions, we may expand the commitments under the
Facility by an additional $500 million. The Facility also provides for the issuance of up to $200 million of letters of
credit at our request, which count as usage of the available commitments under the Facility. In each of 2013, 2014
and 2015, we extended the maturity date of the Facility by one year. The maturity date of the Facility is March 27,
2020.
Various interest rate options are available under the Facility. Any revolving borrowings mature on the termination
date of the Facility. We pay facility fees on the Facility ranging from .050% to .150% per annum, depending upon
our long-term senior unsecured debt rating. The facility fee was .100% at December 31, 2015. The Facility
contains a financial covenant that requires us to maintain a ratio of total debt to consolidated capitalization as of the
end of each fiscal quarter at or below 50%. For this purpose, consolidated capitalization equals the sum of total
shareholders’ equity, excluding any overfunded or underfunded status of our pension and OPEB plans and any net
unrealized capital gains and losses, and total debt (as defined in the Facility). We met this requirement at
December 31, 2015. There were no amounts outstanding under the Facility at any time during the year ended
December 31, 2015 or 2014.
Bridge Credit Agreement
On July 30, 2015, we entered into a 364-day senior unsecured bridge credit agreement (the “Bridge Credit
Agreement”) with a group of fifteen lenders. Under the Bridge Credit Agreement, we may borrow on an unsecured
basis an aggregate principal amount of up to $13.0 billion, to the extent that we have not received $13.0 billion of