Walgreen enters £1.45 billion term loan, $2.25 billion revolver

By Marisa Wong

Madison, Wis., Nov. 12 – Walgreen Co. and direct wholly owned subsidiary Walgreens Boots Alliance, Inc. entered into a £1.45 billion unsecured term loan credit agreement on Nov. 10, according to an 8-K filing with the Securities and Exchange Commission.

Bank of America, NA is the administrative agent under the term loan credit agreement; HSBC Bank plc is the syndication agent; Merrill Lynch, Pierce, Fenner & Smith Inc., HSBC Bank plc, Deutsche Bank Luxembourg SA, Goldman Sachs Bank USA, J.P. Morgan Securities LLC, Morgan Stanley Senior Funding, Inc. and Wells Fargo Bank, NA are joint lead arrangers and joint bookrunners; and Deutsche Bank Luxembourg SA, Goldman Sachs Bank USA, JPMorgan Chase Bank, NA, Morgan Stanley Senior Funding, Inc. and Wells Fargo Bank, NA are co-documentation agents.

Borrowings may be used to finance a portion of the company’s acquisition of the remaining issued and outstanding share capital of Alliance Boots GmbH and to refinance Alliance Boots’ existing debt.

Availability of the loans under the term loan agreement, which have not yet been funded, is subject to the satisfaction or waiver of some conditions. The date on which those conditions are satisfied or waived in connection with completion of the Alliance Boots acquisition is the funding date.

Loans are to be made in a single borrowing on the funding date and will mature and be payable in full on the fifth anniversary of the funding date.

Borrowings will bear interest at Libor plus an applicable margin ranging from 70 basis points to 120 bps, based on the borrower’s credit ratings.

The borrower will also pay ticking fees accruing from and including the date that is 60 days after Nov. 10.

Voluntary prepayments of the loans and voluntary reductions of the unused portion of the commitments under the term loan are permissible without penalty.

The term loan agreement requires the borrower to repay to the administrative agent, for the account of the lenders, loans in a principal amount equal to (a) 1.25% of the aggregate principal amount of the loans made on the funding date on each of the dates that are three, six, nine and 12 months after the second anniversary of the funding date, (b) 1.875% of the aggregate principal amount of the loans made on the funding date on each of the dates that are three, six, nine and 12 months after the third anniversary of the funding date and (c) 2.5% of the aggregate principal amount of the loans made on the funding date on each of the dates that are three, six and nine months after the fourth anniversary of the funding date.

The credit agreement includes a financial covenant requiring that, as of the last day of each fiscal quarter beginning with the first quarter-end after the funding date, the ratio of consolidated debt to total capitalization not be greater than 0.60 to 1.00.

Multicurrency revolver

On Nov. 10, concurrently with the delivery of the term loan agreement, Walgreen and Walgreens Boots entered into a $2.25 billion revolving credit agreement for a five-year unsecured multicurrency revolving facility.

Bank of America, NA is the administrative agent under the revolving credit agreement; HSBC Securities (USA) Inc. is the syndication agent; Merrill Lynch, Pierce, Fenner & Smith Inc., HSBC Securities (USA) Inc., Deutsche Bank Luxembourg SA, Goldman Sachs Bank USA, J.P. Morgan Securities LLC, Morgan Stanley Senior Funding, Inc. and Wells Fargo Bank, NA are joint lead arrangers and joint bookrunners; and Deutsche Bank Luxembourg SA, Goldman Sachs Bank USA, JPMorgan Chase Bank, NA, Morgan Stanley Senior Funding, Inc. and Wells Fargo Bank, NA are co-documentation agents.

The revolving credit agreement replaces the company’s previous credit agreements dated July 20, 2011 and July 23, 2012. The company repaid all outstanding obligations under each of the prior credit facilities and terminated the former credit agreements.

Of the total commitments, $375 million will be available for the issuance of letters of credit.

On and after an additional commitment availability date, the aggregate commitment will be increased to $3 billion, of which $500 million will be available for the issuance of letters of credit.

The issuance of letters of credit reduces the aggregate amount otherwise available under the credit agreement for making revolving loans.

Commitments can be increased to up to $4.5 billion total.

The parent company will be the initial borrower under the revolver.

Revolving loans may be repaid and reborrowed at any time prior to the earlier of Nov. 10, 2019, subject to extension, and the date of termination in whole of the lenders’ commitments under the credit agreement in.

Loans will be available in dollars, sterling, euros, yen, Swiss franc or any other currency approved by the lenders.

Borrowings will bear interest at Libor plus an applicable margin of 87.5 bps to 162.5 bps, calculated based on the borrower’s credit ratings.

The company must pay a commitment fee of 8 bps to 22.5 bps, also based on credit ratings.

Voluntary prepayments of the loans and voluntary reductions of the unused portion of the commitments are permissible without penalty.

The revolving credit agreement contains financial covenants and events of default substantially similar to those contained in the term loan agreement.

Walgreen is a Deerfield, Ill.-based drugstore chain.

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