Walgreens 2015 Annual Report Download - page 27

We may incur or assume significantly more debt in the future, including in connection with acquisitions, strategic
investments or joint ventures. For example, we incurred significant additional debt in connection with the Second
Step Transaction. Further, we intend to finance our pending acquisition of Rite Aid through a combination of
cash on hand and debt financing. We have entered into a bridge facility commitment letter and expect to obtain
permanent financing to replace such bridge facility prior to the closing of the transaction, but cannot guarantee
that we will obtain such permanent financing on terms that are acceptable to us or at all. See “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 below and Note 21,
Subsequent Event, to our Consolidated Financial Statements in Part II, Item 8 below. If we add new debt and do
not retire existing debt, the risks described above could increase. We also could be adversely impacted by any
failure to renew or replace, on terms acceptable to us or at all, existing funding arrangements when they expire,
and any failure to satisfy applicable covenants.
Our long-term debt obligations include covenants that may adversely affect our ability, and the ability of certain
of our subsidiaries, to incur certain secured indebtedness or engage in certain types of transactions. In addition,
our existing credit agreements require us to maintain as of the last day of each fiscal quarter a ratio of
consolidated debt to total capitalization not to exceed a certain level. Our ability to comply with these restrictions
and covenants may be affected by events beyond our control. If we breach any of these restrictions or covenants
and do not obtain a waiver from the lenders, then, subject to applicable cure periods, our outstanding
indebtedness could be declared immediately due and payable. This could have a material adverse effect on our
business operations and financial condition.
Our credit ratings and ability to access well-functioning capital markets are important to us.
Historically, we have relied on the public debt capital markets to fund portions of our capital investments and
access to the commercial paper market and bank credit facilities as part of our working capital management
strategy. Our continued access to these markets, and the terms of such access, depend on multiple factors
including the condition of debt capital markets, our operating performance, and our credit ratings. The major
credit rating agencies have assigned us and our corporate debt investment grade credit ratings. These ratings are
based on a number of factors, which include their assessment of our financial strength and financial policies. We
aim to maintain investment grade ratings as they serve to lower our borrowing costs and facilitate our access to a
variety of lenders and other creditors, including landlords for our leased stores, on terms that we consider
advantageous to our businesses. However, there can be no assurance that any particular rating assigned to us will
remain in effect for any given period of time or that a rating will not be changed or withdrawn by a rating agency,
if in that rating agency’s judgment, future circumstances relating to the basis of the rating so warrant. Incurrence
of additional debt by us, including, if the pending acquisition of Rite Aid is completed, outstanding Rite Aid
indebtedness we acquire upon closing and any additional debt we issue in connection with the financing of the
transaction, could adversely affect our credit ratings. Any disruptions or turmoil in the capital markets or any
downgrade of our credit ratings could adversely affect our cost of funds, liquidity, competitive position and
access to capital markets, which could materially and adversely affect our business operations, financial
condition, and results of operations.
As a holding company, Walgreens Boots Alliance is dependent on funding from its operating subsidiaries
to pay dividends and other obligations.
Walgreens Boots Alliance is a holding company with no business operations of its own. Its only significant asset
is the outstanding capital stock of its subsidiaries. As a result, it is dependent on funding from its subsidiaries,
including Walgreens and Alliance Boots, to meet its obligations. Additionally, Walgreens Boots Alliance’s
subsidiaries may be restricted in their ability to pay cash dividends or to make other distributions to Walgreens
Boots Alliance, which may limit the payment of cash dividends or other distributions to the holders of Walgreens
Boots Alliance common stock. Credit facilities and other debt obligations of Walgreens Boots Alliance, as well
as statutory provisions, may further limit the ability of Walgreens Boots Alliance and its subsidiaries to pay
dividends.
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