Health Net 2015 Annual Report Download - page 195

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-34
(ii) Bank of America, N.A.’s “prime rate” and (iii) the Eurodollar Rate (as such term is defined in the credit facility) for
a one-month interest period plus one percent) plus an applicable margin ranging from 45 to 105 basis points or (b) the
Eurodollar Rate plus an applicable margin ranging from 145 to 205 basis points. The applicable margins are based on
our consolidated leverage ratio, as specified in the credit facility, and are subject to adjustment following the
Company’s delivery of a compliance certificate for each fiscal quarter.
Our revolving credit facility includes, among other customary terms and conditions, limitations (subject to
specified exclusions) on our and our subsidiaries’ ability to incur debt; create liens; engage in certain mergers,
consolidations and acquisitions; sell or transfer assets; enter into agreements that restrict the ability to pay dividends or
make or repay loans or advances; make investments, loans, and advances; engage in transactions with affiliates; and
make dividends. In addition, we are required to be in compliance at the end of each fiscal quarter with a specified
consolidated leverage ratio and consolidated fixed charge coverage ratio. As of December 31, 2015, we were in
compliance with all covenants under the revolving credit facility.
Our revolving credit facility contains customary events of default, including nonpayment of principal or other
amounts when due; breach of covenants; inaccuracy of representations and warranties; cross-default and/or cross-
acceleration to other indebtedness of the Company or our subsidiaries in excess of $50 million; certain ERISA-related
events; noncompliance by the Company or any of our subsidiaries with any material term or provision of the HMO
Regulations or Insurance Regulations (as each such term is defined in the credit facility) in a manner that could
reasonably be expected to result in a material adverse effect; certain voluntary and involuntary bankruptcy events;
inability to pay debts; undischarged, uninsured judgments greater than $50 million against us and/or our subsidiaries
that are not stayed within 60 days; actual or asserted invalidity of any loan document; and a change of control. If an
event of default occurs and is continuing under the revolving credit facility, the lenders thereunder may, among other
things, terminate their obligations under the facility and require us to repay all amounts owed thereunder.
The pending Merger with Centene, if completed, would constitute a change of control under the terms of our
revolving credit facility, which would constitute an event of default thereunder. Accordingly, if the pending Merger with
Centene is completed prior to the due date of the facility, the lenders thereunder may, among other things, terminate
their obligations under the facility and require us to repay all outstanding amounts thereunder and replace the existing
letters of credit discussed below. See Note 1 to our consolidated financial statements for additional information
regarding our pending Merger with Centene.
Letters of Credit
Pursuant to the terms of our revolving credit facility, we can obtain letters of credit in an aggregate amount of
$400 million and the maximum amount available for borrowing is reduced by the dollar amount of any outstanding
letters of credit. As of December 31, 2015 and 2014, we had outstanding letters of credit of $7.1 million and $8.6
million, respectively, resulting in a maximum amount available for borrowing of $307.9 million and $491.4 million,
respectively. As of December 31, 2015 and 2014, no amounts had been drawn on any of these letters of credit.
Senior Notes
In 2007 we issued $400 million in aggregate principal amount of 6.375% Senior Notes due 2017 ("Senior
Notes"). The indenture governing the Senior Notes limits our ability to incur certain liens, or consolidate, merge or sell
all or substantially all of our assets. In the event of the occurrence of both (1) a change of control of Health Net, Inc.
and (2) a below investment grade rating by any two of Fitch, Inc., Moody’s Investors Service, Inc. and Standard &
Poor’s Ratings Services within a specified period, we will be required to make an offer to purchase the Senior Notes at
a price equal to 101% of the principal amount of the Senior Notes plus accrued and unpaid interest to the date of
repurchase. As of December 31, 2015, no default or event of default had occurred under the indenture governing the
Senior Notes.
The Senior Notes may be redeemed in whole at any time or in part from time to time, prior to maturity at our
option, at a redemption price equal to the greater of:
• 100% of the principal amount of the Senior Notes then outstanding to be redeemed; or