Quest Diagnostics 2011 Annual Report Download - page 96

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on October 1, 2011. The Senior Notes due 2040 require semi-annual interest payments, which commenced on
July 30, 2011. The 2011 Senior Notes are unsecured obligations of the Company and rank equally with the
Company’s other senior unsecured obligations. The 2011 Senior Notes do not have a sinking fund requirement
and are guaranteed by certain of the Company’s domestic, wholly-owned subsidiaries (the “Subsidiary
Guarantors”).
The Company incurred $10.4 million of costs associated with the 2011 Senior Notes, which is being
amortized over the term of the related debt.
The Company used $750 million of the net proceeds from the 2011 Senior Notes to fund the purchase price
and related transaction costs associated with its acquisition of Athena, which closed on April 4, 2011 (see Note
4), and $485 million of the net proceeds, together with $90 million of cash on hand, to repay outstanding
indebtedness under the Company’s senior unsecured revolving credit facility and its secured receivables credit
facility.
Senior Unsecured Revolving Credit Facility
In September 2011, the Company entered into a $750 million senior unsecured revolving credit facility (the
“Credit Facility”) which replaced the Company’s then existing $750 million senior unsecured revolving credit
facility that was scheduled to mature in May 2012. Interest on the Credit Facility, which matures in September
2016, is based on certain published rates plus an applicable margin that will vary over a range from 75 basis
points to 175 basis points based on changes in the Company’s public debt ratings. At the option of the Company,
it may elect to lock into LIBOR-based interest rates 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, the federal funds rate or an adjusted LIBOR rate. At December 31,
2011, the Company’s borrowing rate for LIBOR-based loans under the Credit Facility was LIBOR plus 1.125%.
At December 31, 2010, the Company’s borrowing rate for LIBOR-based loans under its then existing senior
unsecured revolving credit facility was LIBOR plus 0.40%. The Credit Facility is currently guaranteed by the
Subsidiary Guarantors. The Company expects that the guarantees provided by the Subsidiary Guarantors will no
longer be required after the full repayment of the amounts outstanding under the term loan due May 2012. The
Credit Facility contains various covenants, including the maintenance of certain financial ratios, which could
impact the Company’s ability to, among other things, incur additional indebtedness. At both December 31, 2011
and 2010, there were no outstanding borrowings under the Company’s senior unsecured revolving credit facility.
Secured Receivables Credit Facility
On December 9, 2011, the Company extended its $525 million secured receivables securitization facility (the
“Secured Receivables Credit Facility”). 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 7,
2012 and (b) $250 million, which also matures on December 7, 2012. 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, 2011 and 2010, the Company’s borrowing rate under the Secured Receivables Credit Facility was
1.0% and 1.2%, respectively.
Term Loan due 2012
On May 31, 2007, the Company entered into a five-year term loan facility (the “Term Loan due 2012”). The
Term Loan due 2012 matures on May 31, 2012 and requires principal repayments of $280 million on both March
31, 2012 and May 31, 2012. 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 lock into LIBOR-based interest rates 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, 2011 and 2010,
the Company’s borrowing rate for LIBOR-based loans was LIBOR plus 0.40%.
F-24
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)