| Item 1.01. | Entry into a Material Definitive Agreement. |
On June 3, 2019, Laboratory Corporation of America® Holdings (NYSE: LH) (“LabCorp”) entered into a new Term Loan Credit Agreement (the “Term Loan Credit Agreement”), which provides for atwo-year term loan credit facility in the principal amount of $850 million (the “New Term Loan Facility”). Bank of America, N.A. is acting as administrative agent for a group of financial institutions providing the New Term Loan Facility. The proceeds from the borrowings under the New Term Loan Facility will be used for general corporate purposes, including to repay other indebtedness and in connection with the previously announced acquisition of the nonclinical research services business of Envigo International Holdings, Inc. (“Envigo”). The entire $850 million principal amount of the New Term Loan Facility was advanced on June 3, 2019, with approximately $250 million of the proceeds being applied to repay a portion of the existing loans outstanding under LabCorp’s prior term loan credit facility entered into on September 15, 2017.
Under the New Term Loan Facility, LabCorp is required to maintain a leverage ratio of no greater than 4.00 to 1.00 (provided, that in the event LabCorp consummates a qualified acquisition, LabCorp can elect to increase the maximum leverage ratio level to 4.50 to 1.00 for the fiscal quarter in which such qualified acquisition is consummated and for the next three consecutive fiscal quarters), and is subject to negative covenants limiting subsidiary indebtedness and certain other covenants typical for investment grade-rated borrowers.
The New Term Loan Facility accrues interest at a per annum rate equal to, at LabCorp’s election, either a LIBOR rate plus a margin ranging from 0.55% to 1.175%, or a base rate determined according to a prime rate or federal funds rate plus a margin ranging from 0.00% to 0.175%. The interest margin applicable to the New Term Loan Facility is based on LabCorp’s senior credit ratings as determined by Standard & Poor’s and Moody’s, which are currently BBB and Baa2, respectively.
The foregoing description of the New Term Loan Facility is qualified in its entirety by reference to the Term Loan Credit Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
| Item 2.03. | Creation of a Direct Financial Obligation or an Obligation under anOff-Balance Sheet Arrangement of a Registrant. |
The disclosure contained in Item 1.01 is incorporated herein by reference.
| Item 7.01. | Regulation FD Disclosure. |
LabCorp announced on June 3, 2019 that LabCorp’s Covance Drug Development segment completed its previously announced acquisition of Envigo’s nonclinical research services business and disposition to Envigo of its Covance Research Products business. A copy of the press release announcing this transaction has been furnished as Exhibit 99.1 hereto.
In addition, on June 3, 2019, LabCorp announced the closing of the New Term Loan Facility. A copy of the press release announcing the New Term Loan Facility has been furnished as Exhibit 99.2 hereto.
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