McKesson 2013 Annual Report Download - page 53

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McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
Credit Resources:
We fund our working capital requirements primarily with cash and cash equivalents, as well as short-term borrowings
under the accounts receivable sales facility, revolving credit facility and from commercial paper issuances.
Senior Bridge Term Loan Facility
In connection with our acquisition of PSS World Medical, in December 2012 we entered into a $2.1 billion unsecured
Senior Bridge Term Loan Agreement (“2013 Bridge Loan”). In February 2013, we reduced the 2013 Bridge Loan
commitment to $900 million. On February 22, 2013, we borrowed $900 million under the 2013 Bridge Loan. The proceeds
from the 2013 Bridge Loan and our existing cash on hand were used to redeem the assumed debt from PSS World Medical
and pay the equity shareholders of PSS World Medical. On March 8, 2013, we repaid the 2013 Bridge Loan with the funds
obtained from the issuance of long-term debt and the 2013 Bridge Term Loan Agreement was terminated. During the time it
was outstanding, the 2013 Bridge Loan balance bore interest of 1.20% per annum, based on the London Interbank Offered
Rate plus a margin based on the Company's credit rating. Corporate interest expense for 2013 includes $11 million related to
fees incurred on the 2013 Bridge Loan.
In connection with our execution of an agreement to acquire US Oncology, in November 2010 we entered into a $2.0
billion unsecured Senior Bridge Term Loan Agreement (“2011 Bridge Loan”). In December 2010, we reduced the 2011
Bridge Loan commitment to $1.0 billion. On January 31, 2011, we borrowed $1.0 billion under the 2011 Bridge Loan. On
February 28, 2011, we repaid the 2011 Bridge Loan with the funds obtained from the issuance of long-term debt and the 2011
Bridge Term Loan Agreement was terminated. During the time it was outstanding, the 2011 Bridge Loan bore interest of
1.76% per annum, based on the London Interbank Offered Rate plus a margin based on the Company's credit rating.
Corporate Interest expense for 2011 includes $25 million related to fees incurred on the 2011 Bridge Loan.
PSS World Medical Debt Acquired
Upon our purchase of PSS World Medical in February 2013, we assumed the outstanding debt of PSS World Medical.
Prior to our acquisition, PSS World Medical called for redemption of all its outstanding 6.375% Senior Notes due 2022. Due
to the change in control provisions of the 3.125% Senior Convertible Notes due 2014, the notes were convertible to cash at
the option of the note holders. All the note holders opted to receive cash. In the fourth quarter of 2013, we redeemed both of
these notes, including accrued interest for $643 million using cash on hand and borrowings under our 2013 Bridge Loan.
US Oncology Debt Acquired
Upon our purchase of US Oncology in December 2010, we assumed the outstanding debt of US Oncology Holdings, Inc.
and its wholly-owned subsidiary US Oncology, Inc. Immediately prior to our acquisition, US Oncology Holdings, Inc. called
for redemption of all of its outstanding Senior Unsecured Floating Rate Toggle Notes due 2012 and US Oncology, Inc. called
for redemption of all of its outstanding 9.125% Senior Secured Notes due 2017 and 10.75% Senior Subordinated Notes due
2014. In the fourth quarter of 2011, we paid interest of $50 million and redeemed these notes, including the remaining
accrued interest for $1,738 million using cash on hand and borrowings under our 2011 Bridge Loan.
Long-Term Debt
On March 8, 2013, we issued 1.40% notes due March 15, 2018 in an aggregate principal amount of $500 million and
2.85% notes due March 15, 2023 in an aggregate principal amount of $400 million. Interest on these notes is payable on
March 15 and September 15 of each year beginning on September 15, 2013. We utilized net proceeds, after discounts and
offering expenses, of $891 million from the issuance of these notes to repay borrowings under the 2013 Bridge Loan.
On December 4, 2012, we issued 0.95% notes due December 4, 2015 in an aggregate principal amount of $500 million
(“Notes due 2015”) and 2.70% notes due December 15, 2022 in an aggregate principal amount of $400 million (“Notes due
2022”). Interest on the Notes due 2015 is payable on June 4 and December 4 of each year beginning on June 4, 2013 and on
the Notes due 2022 is payable on June 15 and December 15 of each year beginning on June 15, 2013. We utilized net
proceeds, after discounts and offering expenses, of $892 million from the issuance of these notes for general corporate
purposes and replenishing working capital that was used to repay long-term debt that matured in February 2012 and in March
2013.