LabCorp to sell $250 million 10-year senior notes to partly fund $500 million stock buybacks

By Ronda Fears

Nashville, Dec. 8 - Laboratory Corp. of America Holdings on Thursday launched $250 million of 10-year senior unsecured notes via bookrunner Banc of America Securities LLC, with proceeds earmarked to partly fund a $500 million share repurchase program.

The registered notes will be senior unsecured obligations and rank equally with all of LabCorp's other existing and future senior unsecured debt.

Late Wednesday, LabCorp announced a stock buyback of $500 million and in connection with the program immediately purchased about 4.8 million shares of stock for $250 million, financed with borrowings under its senior credit facility, from Bank of America NA.

Proceeds from the bond offering will be used, along with cash on hand, to repay the bank debt.

The remainder shares repurchased under the program will be purchased in the open market from time to time, the company said, with funds from its existing senior credit facility, future offerings of debt or other credit facilities, or cash on hand.

Lehman Brothers, Inc. is the co-manager of the bond offering.

Moody's Investors Service has rated the new notes at Baa3 with a stable outlook for LabCorp. Moody's said the rating and outlook assume that the company will be able to accumulate cash to prepare for a put on its zero-coupon convertible bonds, which comes in September 2006 at a potential liability of $530 million.

The rating agency anticipates LabCorp will generate annual operating cash flow of between $570 million to $600 million, and free cash flow of $475 million to $500 million over the next two years, resulting in an adjusted operating cash flow to adjusted debt ratio of 40% and an adjusted free cash flow to adjusted debt ratio of 30%.

Standard & Poor's assigned its BBB rating to the new notes with a stable outlook.

Burlington, N.C.-based LabCorp operates as an independent clinical laboratory company in the United States. It offers a range of clinical laboratory tests, such as drug and alcohol testing in addition to blood cell counts, Pap tests, HIV tests, microbiology cultures and procedures. It also offers specialty services, including allergy testing; clinical trials testing; oncology testing in which it diagnoses and monitors certain cancers, HIV genotyping and phenotyping and diagnostic genetics that include cytogenetic, molecular cytogenetic, biochemical, and molecular genetic tests.

LabCorp shares Thursday roared higher by $2.30, or 4.42%, to close at $54.34.

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