Long-Term Debt and Credit Facilities

6 Months Ended

Jun. 30, 2014

Long-Term Debt and Credit Facilities

Long-Term Debt and Credit Facilities

5.  Long-Term Debt and Credit Facilities

Long-Term Debt

In November 2013, Covance entered into a private placement of senior notes (“Senior Notes”) in an aggregate principal amount of $250 million pursuant to a Note Purchase Agreement (the “Note Purchase Agreement”) dated October 2, 2013. The Senior Notes were issued in four series and are reflected in long-term debt on the consolidated balance sheets as of both June 30, 2014 and December 31, 2013:

(dollars in millions)
3.25% Senior Notes, Series 2013A due November 15, 2018	$	15
3.90% Senior Notes, Series 2013B due November 15, 2020	50
4.50% Senior Notes, Series 2013C due November 15, 2023	90
4.65% Senior Notes, Series 2013D due November 15, 2025	95
Total long-term debt outstanding	$	250

Interest on the Senior Notes is payable semiannually on May 15th and November 15th of each year. The Senior Notes rank equally with all outstanding indebtedness. Costs associated with the Note Purchase Agreement, which consisted primarily of bank and legal fees totaling $0.9 million, are being amortized ratably over the terms of the Senior Notes. The proceeds were used to pay down existing indebtedness.

The Note Purchase Agreement contains various financial and other covenants and is guaranteed by certain of Covance’s domestic subsidiaries. At June 30, 2014, Covance was in compliance with the terms of the Note Purchase Agreement.

Credit Facilities

In June 2014, Covance amended its credit facility, which was not due to expire until March 2017, primarily to obtain improved market pricing. The amended credit agreement (the “Credit Agreement”) provides for a revolving credit facility of up to $500 million. At June 30, 2014 there were $40.0 million of outstanding borrowings and $2.9 million of outstanding letters of credit under the Credit Agreement. At December 31, 2013, there were no outstanding borrowings and $2.9 million of outstanding letters of credit under the previous credit facility. Interest on all outstanding borrowings under the Credit Agreement varies in accordance with the terms of the Credit Agreement and is presently based upon the London Interbank Offered Rate plus a margin of 100 basis points.  Interest on all outstanding borrowings under the previous credit facility was based upon the London Interbank Offered Rate plus a margin of 125 basis points. Interest on outstanding borrowings approximated 1.77% per annum during both the three and six months ended June 30, 2014. Interest on outstanding borrowings approximated 1.46% per annum during both the three and six months ended June 30, 2013.  Costs associated with the Credit Agreement, which expires in June 2019, consisted primarily of bank and legal fees totaling $0.9 million and are being amortized over the five-year term.

The Credit Agreement contains various financial and other covenants and is collateralized by guarantees of certain of Covance’s domestic subsidiaries.  At June 30, 2014, Covance was in compliance with the terms of the Credit Agreement.