LabCorp 2015 Annual Report Download - page 104

Index
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On February 13, 2015, the Company entered into a 60-day cash bridge term loan credit facility in the principal amount of $400.0 for the purpose of
financing a portion of the cash consideration and the fees and expenses in connection with the transactions contemplated by the Merger Agreement. The 60-
day cash bridge term loan credit facility was entered into on the terms set forth in the bridge facility commitment letter for the $400.0 60-day cash bridge
tranche. The 60-day cash bridge term loan credit facility was advanced in full on the Acquisition Date. On March 16, 2015, the Company elected to prepay
the bridge facility without penalty.
Under the term loan facility and the new revolving credit facility, which have affirmative and negative covenants that are substantially identical, the
Company is subject to negative covenants limiting subsidiary indebtedness and certain other covenants typical for investment grade-rated borrowers and the
Company is required to maintain a leverage ratio that varies. Prior to the Acquisition Date, the leverage ratio was required to have been no greater than 3.75
to 1.0 calculated by excluding the $2,900.0 in total aggregate principal amount of the Company's senior notes issued for the purpose of funding the
acquisition. From and after the acquisition closing date, the leverage ratio must be no greater than 4.75 to 1.0 with respect to the last day of each of the first
four fiscal quarters ending on or after the closing date, 4.25 to 1.0 with respect to the last day of each of the fifth through eighth fiscal quarters ending after
the closing date, and 3.75 to 1.0 with respect to the last day of each fiscal quarter ending thereafter. The Company was in compliance with all covenants in
the term loan facility and the new revolving credit facility at December 31, 2015. As of December 31, 2015, the ratio of total debt to consolidated EBITDA
was 3.6 to 1.0.
The term loan credit facility accrues interest at a per annum rate equal to, at the Company’s election, either a LIBOR rate plus a margin ranging from
1.125% to 2.00%, or a base rate determined according to a prime rate or federal funds rate plus a margin ranging from 0.125% to 1.00%. Advances under the
new revolving credit facility will accrue interest at a per annum rate equal to, at the Company’s election, either a LIBOR rate plus a margin ranging from
1.00% to 1.60%, or a base rate determined according to a prime rate or federal funds rate plus a margin ranging from 0.00% to 0.60%. Fees are payable on
outstanding letters of credit under the new revolving credit facility at a per annum rate equal to the applicable margin for LIBOR loans, and the Company is
required to pay a facility fee on the aggregate commitments under the new revolving credit facility, at a per annum rate ranging from 0.125% to 0.40%. The
interest margin applicable to the credit facilities, and the facility fee and letter of credit fees payable under the new revolving credit facility, are based on the
Company’s senior credit ratings as determined by S&P’s and Moody’s, which are currently BBB and Baa2, respectively.
As of December 31, 2015, the effective interest rate on the new Revolving Credit Facility was 1.5%.
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The Company had $105.4 and $106.9 aggregate principal amount at maturity of zero-coupon convertible subordinated notes (the Notes) due 2021
outstanding at December 31, 2015 and 2014, respectively. The Notes, which are subordinate to the Company’s bank debt, were sold at an issue price of
$671.65 per $1,000.0 principal amount at maturity (representing a yield to maturity of 2.0% per year). Each one thousand dollar principal amount at maturity
of the Notes is convertible into 13.4108 shares of the Company’s common stock, subject to adjustment in certain circumstances, if one of the following
conditions occurs:
1) If the sales price of the Company’s common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading
day of the preceding quarter reaches specified thresholds (beginning at 120% and declining 0.1282% per quarter until it reaches approximately
110% for the quarter beginning July 1, 2021 of the accreted conversion price per share of common stock on the last day of the preceding quarter).
The accreted conversion price per share will equal the issue price of a note plus the accrued original issue discount and any accrued contingent
additional principal, divided by the number of shares of common stock issuable upon conversion of a note on that day. The conversion trigger price
for the fourth quarter of 2015 was $75.11.
2) If the credit rating assigned to the notes by S&P’s Ratings Services is at or below BB-.
3) If the Notes are called for redemption.
4) If specified corporate transactions have occurred (such as if the Company is party to a consolidation, merger or binding share exchange or a transfer
of all or substantially all of its assets).
The Company may redeem for cash all or a portion of the Notes at any time at specified redemption prices per one thousand dollar principal amount at
maturity of the Notes.
The Company has registered the notes and the shares of common stock issuable upon conversion of the Notes with the Securities and Exchange
Commission.
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