Bloomberg News

Express Scripts Sells $3.5 Billion of Debt for Medco Purchase

February 07, 2012

Feb. 6 (Bloomberg) -- Express Scripts Inc., the pharmacy- benefits manager planning to buy Medco Health Solutions Inc., raised $3.5 billion in a second bond sale to help fund the $29.1 billion acquisition.

Express Scripts issued $1 billion of three-year notes, $1.5 billion of five-year debt and $1 billion of securities due in 10 years, according to data compiled by Bloomberg. The company will use the proceeds to help pay back $14 billion of bridge loans it took on for the purchase, the St. Louis-based company said today in a statement.

The company, which is seeking approval from the U.S. Federal Trade Commission to complete the deal in the first half of 2012, needs $11 billion to $12 billion of debt to complete the cash part of the acquisition, Fitch Ratings analysts led by Bob Kirby said in a report today. The company sold $4.1 billion of debt in November to cut the bridge loan.

The three-year notes pay a 2.1 percent coupon, or 195 basis points more than Treasuries with similar maturities, Bloomberg data show. The five-year, 2.65 percent bonds were issued at a 210 basis-point premium, while the spread on the 10-year, 3.9 percent notes was 225 basis points.

In November, Express Scripts issued $900 million of 2.75 percent, three-year notes yielding 240 basis points more than Treasuries with similar maturities; $1.25 billion of 3.5 percent, five-year notes at a 260 basis-point spread, $1.25 billion of 4.75 percent, 10-year notes at 280 basis points more than benchmarks and $700 million of 6.125 percent, 30-year bonds at a 305 basis-point spread, Bloomberg data show.

A basis point is 0.01 percentage point.

Bond Provision

The bonds issued today, like the November offering, include a provision that requires them to be redeemed at 101 cents on the dollar if the acquisition isn’t completed by a certain date, according to a person with knowledge of the offering, who declined to be identified as the details were private. A filing with the November notes said that would be on or before April 20.

Express Scripts got commitments for the one-year bridge facility in July. Credit Suisse Group AG and Citigroup Inc. each agreed to provide half of the principal amount, according to a regulatory filing on July 22.

--With assistance from Molly Peterson in Washington. Editors: Shannon D. Harrington, Mitchell Martin

To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net; Zeke Faux in New York at zfaux@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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