McKesson 2014 Annual Report Download - page 89

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
86
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, with such proceeds and 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 borrowings with funds obtained from the issuance of long-term debt and the
bridge loan agreement was subsequently terminated. During the time it was outstanding, the 2013 Bridge Loan borrowings bore
interest at 1.20% per annum, based on the London Interbank Offered Rate plus a margin based on the Company’s credit rating.
Interest expense for 2013 included $11 million of fees related to the 2013 Bridge Loan.
Celesio Debt
Upon the acquisition of Celesio, as required, we consolidated Celesio’s outstanding debt arrangements:
• Accounts receivable factoring facility arrangements with a committed balance of $308 million. Transactions under these
facilities are accounted for as secured borrowings with interest rates ranging 1.33% to 2.31%. These facilities will expire
through September 2015 and Celesio may renew certain facilities before their expiration. Between February 7, 2014 and
March 31, 2014, Celesio borrowed and repaid $570 million and $575 million under these facilities. At March 31, 2014,
there were $246 million in secured borrowings and related securitized accounts receivable outstanding under these
facilities, which were included in short-term borrowings and receivables in the consolidated balance sheets.
• Bilateral credit lines with a total committed balance of $1,662 million. As of March 31, 2014, there were $100 million
and $88 million in outstanding short-term and long-term borrowings with interest payable monthly and principal payments
due through October 31, 2023. The outstanding long-term borrowings are included in the caption “Bank liabilities and
other” within the long-term debt table. Bank liabilities also include Celesio’s $100 million term loan outstanding as of
March 31, 2014, with a current variable interest rate of 2.35% and principal repayments due through December 15, 2019.
Celesio also has a syndicated €500 million five-year senior unsecured revolving credit facility, which expires in February
2018. Borrowings under this credit facility bear interest based on the Euro Interbank Offered Rate plus an agreed margin.
From February 7, 2014 through March 31, 2014, there were no amounts outstanding under this credit facility.
• Convertible bonds consisting of 1,857 of 2014 Bonds and 1,104 of 2018 Bonds held by third parties as of the Acquisition
date, totaling $344 million as of the Acquisition date. As previously disclosed in Financial Note 2, “Business
Combinations,” these bonds were either converted to Celesio common shares or redeemed in cash between February 7,
2014 and March 31, 2014. At March 31, 2014, a total of $5 million of 2014 Bonds and 2018 Bonds were outstanding
and included in the caption “Bank liabilities and other” within the long-term debt table.
• Promissory notes, with interest rates ranging from 1.23% to 5.35%, original maturities of 4-7 years and are due through
June 17, 2019. At March 31, 2014, $297 million of promissory notes were outstanding.
• Corporate bonds consisting of 4.00% bonds due October 18, 2016 and 4.50% bonds due April 26, 2017. Interest on these
bonds is due annually each year. At March 31, 2014, $507 million and $737 million of the 4.00% and 4.50% bonds, for
a total of $1,244 million, were outstanding. According to certain terms and conditions of these bonds effective May 7, 2014
bondholders have the option to ask for repayment of the bonds at par value plus accrued interest. If bondholders do not
exercise this option by May 19, 2014, the bonds will remain outstanding until their respective maturity dates. Accordingly,
as at March 31, 2014, these bonds have been classified as a current liability. As of May 7, 2014, the fair value of these
bonds of $1,272 million was more than their par value of $1,184 million.
PSS World Medical Debt
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 of 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 PSS Bridge Loan.