AmerisourceBergen 2005 Annual Report Download - page 41

AmerisourceBergen Corporation 2005
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In December 2004, in connection with entering into the Senior
Revolving Credit Facility, as defined above, the Company repaid the
remaining $180 million outstanding under the Term Facility and there
were no borrowings under the Revolving Facility. In connection with
the early repayment of the Term Facility, the Company incurred a loss
of$1.0 million relating to the write-off of deferred financing costs.
In April 2005, the Company entered into a new $55 million
Blanco revolving credit facility, which replaced the previously existing
facility. The Blanco facility is not classified in the current portion of
long-term debt in the accompanying consolidated balance sheet at
September 30, 2005 because the Company has the ability and intent
to refinance it on a long-term basis. Borrowings under the new Blanco
revolving credit facility are guaranteed by the Company, whereas
borrowings on the previous facility were secured by the Senior
Revolving Credit Facility (defined above). The new facility expires
in April 2006 and borrowings under the new facility will bear interest
at LIBOR plus 90 basis points.
During the fiscal year ended September 30, 2005, the Company
paid $100 million to redeem the Bergen 71⁄4%Senior Notes due June 1,
2005, upon their maturity.
In November 2002, the Company issued $300 million of 71⁄4%
senior notes due November 15, 2012 (the “71⁄4%Notes”). The 71⁄4%
Notes were redeemable at the Company’s option at any time before
maturity at a redemption price equal to 101% of the principal amount
thereof plus accrued and unpaid interest and liquidated damages, if
any,to thedate of redemption and, under some circumstances, a
redemption premium. The Company used the net proceeds of the 71⁄4%
Notes to repay $15.0 million oftheTerm Facility in December 2002,
to repay $150.0 million in aggregate principal of the Bergen 73⁄8%
senior notes in January 2003 and redeem the PharMerica 83⁄8%senior
subordinated notes due 2008 (the “83⁄8%Notes”) at a redemption price
equal to 104.19% of the $123.5 million principal amount in April
2003. The cost of the redemption premium of $5.2 million, less $1.0
million representing the unamortized premium on the 83⁄8%Notes, was
reflected in the Company’s consolidated statement of operations for the
fiscal year ended September 30, 2003 as a loss on the early retirement
of debt. In connection with the issuance of the 71⁄4% Notes,the
Company incurred approximately $5.7 million of costs which were
deferred andwerebeing amortized over the ten-year term of the notes.
As previously mentioned, the 71⁄4%Notes were repaid in September 2005.
In August 2001, the Company issued $500 million of 81⁄8%senior
notes due September 1, 2008 (the “81⁄8%Notes”). The 81⁄8%Notes were
redeemable at the Company’s option at any time before maturity at a
redemption price equal to 101% of the principal amount thereof plus
accrued and unpaid interest and liquidated damages, if any, to the
date of redemption and, under some circumstances, a redemption
premium. Aspreviously mentioned, the 81⁄8% Notes were repaidin
September 2005.
In December 2004, the Company announced that it would redeem
its 5% convertible subordinated notes at a redemption price of
102.143% of the principal amount of the notes plus accrued interest
through the redemption date of January 3, 2005. The noteholders were
given theoption to accept cash or convert the notes to common stock
of the Company. The notes were convertible into 5,663,730 shares of
common stock, which translated to a conversion ratio of 18.8791
shares ofcommon stock for each $1,000 principal amount of notes. In
connection with the redemption, the Company issued 5,663,144 shares
of common stock from treasury to noteholders to redeem substantially
all of the notes and paid $31,000 to redeem the remaining notes.
The indentures governing the 2012 Notes, the 2015 Notes, and
the Senior Revolving Credit Facility contain restrictions and covenants
which includelimitationson additional indebtedness; distributions and
dividends to stockholders; the repurchase of stock and the making
ofother restricted payments; issuance of preferred stock; creation
of certain liens; capital expenditures; transactions with subsidiaries
and other affiliates; and certain corporate acts such as mergers,
consolidations, and the sale of substantially all assets. Additional
covenants require compliance with financial tests, including leverage
and fixed charge coverage ratios, and maintenance of minimum
tangible net worth.
Receivables Securitization Financing
In fiscal 2003, the Company entered into a new $1.05 billion
receivables securitization facility (“Securitization Facility”) and
terminated the AmeriSource and Bergen securitization facilities. In
connection with the Securitization Facility, AmerisourceBergen Drug
Corporation (“ABDC”) sells on a revolving basis certain accounts receiv-
able to AmeriSource Receivables Financial Corporation, a wholly-owned
special purpose entity, which in turn sells a percentage ownership
interest in the receivables commercial paper conduits sponsored by
financial institutions. ABDC is the servicer of the accounts receivable
under the Securitization Facility. After the maximum limit of receiv-
ables sold has been reached and as sold receivables are collected,
additional receivables may be sold up to the maximum amount
available under the facility. In December 2004, the Company amended
the Securitization Facility and under the terms of the amendment the
$550 million (three-year tranche) originally scheduled to expire in
July 2006 was increased to $700 million and the expiration date was
extended to November 2007. Additionally, the $500 million (364-day
tranche) scheduled to expire in July 2005 was reduced to $350 million
and the expiration date was extended to December 2005. In September
2005, the Company elected to terminate the 364-day tranche, effective
October 31, 2005. Interest rates are based on prevailing market rates
for short-term commercial paper plus a program fee, and will vary
based on the Company’s debt ratings. The program fee is 60 basis
points for the three-year tranche and 35 basis points for the 364-day
tranche at September 30, 2005. Additionally, the commitment fee on
any unused credit was reduced to 20 basis points for the three-year
trancheand to 17.5 basis points for the 364-day tranche at September
30, 2005. At September 30, 2005, there were no borrowings outstand-
ingunder theSecuritization Facility. In connection with entering into
the Securitization Facility and the amendments thereto, the Company
incurred approximately $2.8 million of costs, which were deferred
and are being amortized over the life of the facility. The Company
securitizes its tradeaccounts, which are generally non-interest bearing,
in transactions that are accounted for as borrowings under SFAS No.
140, “Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities.”
Theagreementgoverning the Securitization Facility contains
restrictions and covenants which include limitations on the incurrence of
additional indebtedness, making of certain restricted payments, issuance
of preferred stock, creation of certain liens, and certain corporate acts
such as mergers, consolidations and sale of substantially all assets.
TheCompany previously utilized the receivables securitization
facilities initiated by AmeriSource (the “ARFC Securitization Facility”)
and Bergen (the “Blue Hill Securitization Program”).
The ARFC Securitization Facility previously provided a total
borrowingcapacity of$400 million. In connection with the ARFC
Securitization Facility, ABDC sold on a revolving basis certain accounts
receivable to ARFC, which in turn sold a percentage ownership interest
in the receivables to a commercial paper conduit sponsored by a
financial institution. ABDC was the servicer of the accounts receivable
under the ARFC Securitization Facility. The ARFC Securitization Facility
had an expiration date of May 2004, prior to its termination.