Financing

9 Months Ended

Sep. 30, 2011

Note 7 — Financing

Long-term debt consists of:


	September 30,		December 31,
(in millions)	2011		2010

3.125% senior notes due 2016, net of unamortized discount	$	1,494.4	$	—
5.25% senior notes due 2012, net of unamortized discount		999.8		999.6
6.25% senior notes due 2014, net of unamortized discount		997.6		996.9
7.25% senior notes due 2019, net of unamortized discount		497.2		497.1
Revolving credit facility due August 29, 2016		—		—
Revolving credit facility due August 13, 2013		—		—
Other		0.2		0.2

Total debt		3,989.2		2,493.8

Less current maturities		999.9		0.1

Long-term debt	$	2,989.3	$	2,493.7

BANK CREDIT FACILITIES

On August 13, 2010, we entered into a credit agreement with a commercial bank syndicate providing for a three-year revolving credit facility of $750.0 million (none of which was outstanding as of September 30, 2011) available for general corporate purposes. The credit agreement requires us to pay interest periodically on the London Interbank Offered Rates (“LIBOR”) or base rate options, plus a margin ranging from 1.55% to 1.95%, depending on our consolidated leverage ratio. Under the credit agreement we are required to pay commitment fees on the unused portion of the $750.0 million revolving credit facility. The commitment fee ranges from 0.20% to 0.30% depending on our consolidated leverage ratio.

On August 29, 2011, we entered into a credit agreement (the “new credit agreement”) with a commercial bank syndicate providing for a five-year $4.0 billion term loan facility (the “term facility”) and a $1.5 billion revolving loan facility (the “new revolving facility”). The term facility will be available to pay a portion of the cash consideration in connection with entering into a definitive merger agreement with Medco, as discussed in Note 3, to repay existing indebtedness, and to pay related fees and expenses. The new revolving facility will be available for general corporate purposes and will replace our existing $750.0 million credit facility upon funding of the term facility. Any funding under the new credit agreement will occur concurrently with the consummation of the Transaction, subject to customary closing conditions. The term facility and the new revolving facility both mature on August 29, 2016. The term facility reduces commitments under the bridge facility discussed below by $4.0 billion.

The new credit agreement requires us to pay interest at the LIBOR or adjusted base rate options, plus a margin. The margin over LIBOR ranges from 1.25% to 1.75% for the term facility and 1.10% to 1.55% for the new revolving facility, and the margin over the base rate options ranges from 0.25% to 0.75% for the term facility and 0.10% to 0.55% for the new revolving facility, depending on our consolidated leverage ratio. Under the new credit agreement we are required to pay commitment fees on the unused portion of the $1.5 billion new revolving facility. The commitment fee ranges from 0.15% to 0.20% depending on our consolidated leverage ratio. Until the funding date, we will also pay a ticking fee on the commitments under the term facility.

BRIDGE FACILITY

On August 5, 2011, we entered into a credit agreement with Credit Suisse AG, Cayman Islands Branch, as administrative agent, Citibank, N.A., as syndication agent, and the other lenders and agents named within the agreement. The credit agreement provides for a one-year unsecured $14.0 billion bridge term loan facility (the “bridge facility”). In the period leading up to the closing of the merger, we may pursue other financing opportunities to replace all or portions of the bridge facility, or, in the event that we draw upon the bridge facility, we may refinance all or a portion of the bridge facility at a later date. The proceeds from these borrowings may be used to pay a portion of the cash consideration to be paid in the merger and to pay related fees and expenses.

The bridge facility requires us to pay interest at the greater of LIBOR or adjusted base rate options, plus a margin. The margin over LIBOR ranges from 1.25% to 1.75%, and the margin over the adjusted base rate options ranges from 0.25% to 0.75%, depending on our consolidated leverage ratio. The margin will increase by 0.25% on the 90^th day after the funding date of the facility and by an additional 0.25% every 90 days thereafter. Until the funding date, we will also pay a ticking fee on the commitments under the bridge facility.

SENIOR NOTES

On May 2, 2011, we issued $1.5 billion aggregate principal amount of 3.125% Senior Notes due 2016 (“2016 Senior Notes”). The 2016 Senior Notes require interest to be paid semi-annually on May 15 and November 15. We may redeem some or all of the 2016 Senior Notes prior to maturity at a price equal to the greater of (1) 100% of the aggregate principal amount of any notes being redeemed, plus accrued and unpaid interest; or (2) the sum of the present values of the remaining scheduled payments of principal and interest on the notes being redeemed, not including unpaid interest accrued to the redemption date, discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the treasury rate plus 20 basis points with respect to any 2016 Senior Notes being redeemed, plus in each case, unpaid interest on the notes being redeemed accrued to the redemption date. The 2016 Senior Notes are jointly and severally and fully and unconditionally guaranteed on a senior basis by most of our current and future 100% owned domestic subsidiaries. We used the net proceeds to repurchase treasury shares.

FINANCING COSTS

Financing costs of $65.0 million related to the bridge facility are being amortized over nine months. An additional $26.0 million of financing costs related to the bridge facility were expensed as a result of the new credit agreement, which reduced the commitments under the bridge facility by $4.0 billion. Amortization of the $65.0 million deferred financing costs will be accelerated in proportion to the amount by which alternative financing replaces the commitments under the bridge facility. Financing costs of $10.9 million for the issuance of the 2016 Senior Notes are being amortized over 5 years. These deferred financing costs are reflected in other intangible assets, net in the accompanying unaudited consolidated balance sheet.

COVENANTS

Our bank financing arrangements contain covenants that restrict our ability to incur additional indebtedness, create or permit liens on assets and engage in mergers or consolidations. The covenants also include minimum interest coverage ratios and maximum leverage ratios. At September 30, 2011, we believe we were in compliance in all material respects with all covenants associated with our credit agreements.