Quest Diagnostics 2009 Annual Report Download - page 95

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Secured Receivables Credit Facility
In December 2008, the Company amended its existing receivables securitization facility (the “Secured
Receivables Credit Facility”) and increased it from $400 million to $500 million. The Secured Receivables Credit
Facility was supported by back-up facilities provided on a committed basis by two banks: (a) $225 million,
which matured on December 11, 2009 and (b) $275 million, which also matured on December 11, 2009.
In April 2009, the Company borrowed $310 million under its Secured Receivables Credit Facility primarily
to fund second quarter payments totaling $308 million in connection with the previously disclosed settlement of
the federal government investigation related to NID (see Note 16). In addition, the Company borrowed $150
million to fund debt repayments in connection with the June 2009 Debt Tender Offer. During 2009, the Company
repaid $510 million on its Secured Receivables Credit Facility.
On December 11, 2009, the Company amended the Secured Receivables Credit Facility and increased it
from $500 million to $525 million. The Secured Receivables Credit Facility continues to be supported by back-up
facilities provided on a committed basis by two banks: (a) $275 million, which matures on December 10, 2010
and (b) $250 million, which also matures on December 10, 2010. Interest on the Secured Receivables Credit
Facility is based on rates that are intended to approximate commercial paper rates for highly-rated issuers. At
December 31, 2009 and 2008, the Company’s borrowing rate under the Secured Receivables Credit Facility was
1.4% and 3.6%, respectively. At December 31, 2009 and 2008, there were no borrowings under the Secured
Receivables Credit Facility.
Term and Bridge Loan Credit Facilities
On May 31, 2007, the Company entered into a five-year term loan facility (the “Term Loan due 2012”),
pursuant to which it borrowed $1.6 billion, and a $1.0 billion bridge loan facility (the “Bridge Loan”), pursuant
to which it borrowed $780 million. The Company used the proceeds to finance the acquisition of AmeriPath, and
related transaction costs, to repay substantially all of AmeriPath’s outstanding debt and to repay the $450 million
outstanding under an interim credit facility used to finance the acquisition of HemoCue and repay substantially
all of HemoCue’s outstanding debt. As discussed below, the Company used the proceeds from a senior notes
offering in 2007 to repay the entire outstanding balance of the Bridge Loan in full.
The Term Loan due 2012 matures on May 31, 2012 and requires principal repayments of $182 million, $280
million and $280 million on December 31, 2011, March 31, 2012 and May 31, 2012, respectively. The Term
Loan due 2012 is guaranteed by the Subsidiary Guarantors. Interest under the Term Loan due 2012 is based on
certain published rates plus an applicable margin that will vary over a range from 40 basis points to 125 basis
points based on changes in the Company’s public debt ratings. At the Company’s option, it may elect to enter
into LIBOR-based interest rate contracts for periods up to six months. Interest on any outstanding amounts not
covered under LIBOR-based interest rate contracts is based on an alternate base rate, which is calculated by
reference to the prime rate or federal funds rate. As of December 31, 2009 and 2008, the Company’s borrowing
rate for LIBOR-based loans was LIBOR (0.2% and 2.2% at December 31, 2009 and 2008, respectively) plus
0.50%.
The Company incurred $7 million of costs associated with the Term Loan due 2012, which is being
amortized over the term of the related debt.
During the years ended December 31, 2009 and 2008, the Company repaid $350 million and $293 million,
respectively, of borrowings outstanding under the Term Loan due 2012.
Industrial Revenue Bonds
In connection with the acquisition of LabOne, Inc. (“LabOne”) in November 2005, the Company assumed
$7.2 million of Industrial Revenue Bonds. Principal was payable annually in equal installments through
September 1, 2009. Interest was payable monthly at a rate which was adjusted weekly (2.0% at December 31,
2008). The bonds were secured by the Lenexa, Kansas laboratory facility and an irrevocable bank letter of credit.
The entire outstanding principal balance of $1.8 million as of December 31, 2008 was repaid in full in
September 2009.
F-25
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)