Debt

9 Months Ended

Sep. 30, 2018

Note 5 ― Debt

The outstanding amounts of debt and capital leases were as follows:

	September 30,		December 31,
(In millions)	2018		2017
Short-term
Commercial paper	$	-	$	100
Current maturities of long-term debt		-		131
Other, including capital leases		9		9
Total short-term debt	$	9	$	240
Long-term
$250 million, 4.375% Notes due 2020	$	247	$	249
$300 million, 5.125% Notes due 2020		298		299
$1,000 million, Floating Rate Notes due 2020		996		-
$1,750 million, 3.2% Notes due 2020		1,741		-
$78 million, 6.37% Notes due 2021		78		78
$300 million, 4.5% Notes due 2021		296		299
$1,000 million, Floating Rate Notes due 2021		995		-
$1,250 million, 3.4% Notes due 2021		1,244		-
$750 million, 4% Notes due 2022		746		745
$100 million, 7.65% Notes due 2023		100		100
$17 million, 8.3% Notes due 2023		17		17
$700 million, Floating Rate Notes due 2023		696		-
$3,100 million, 3.75% Notes due 2023		3,082		-
$900 million, 3.25% Notes due 2025		895		894
$2,200 million, 4.125% Notes due 2025		2,185		-
$600 million, 3.05% Notes due 2027		594		594
$259 million, 7.875% Debentures due 2027		259		258
$3,800 million, 4.375% Notes due 2028		3,771		-
$45 million, 8.3% Step Down Notes due 2033		45		45
$191 million, 6.15% Notes due 2036		190		190
$2,200 million, 4.8% Notes due 2038		2,176		-
$121 million, 5.875% Notes due 2041		119		119
$317 million, 5.375% Notes due 2042		315		315
$1,000 million, 3.875% Notes due 2047		988		988
$3,000 million, 4.9% Notes due 2048		2,961		-
Other, including capital leases		7		9
Total long-term debt	$	25,041	$	5,199

Notes. In September 2018, New Cigna issued $20.0 billion of senior unsecured notes at maturities ranging from 18 months to 30 years (the “Notes”). The various tranches of the Notes are included in the table above and can be identified as those having no balance at December 31, 2017. Of the Notes issued, the Company would be required to redeem $17 billion at a redemption price equal to 101% of the principal amount plus accrued interest if the Merger does not close. The proceeds of these mandatory redeemable notes and a portion of the proceeds of the notes due 2048, both of which reported in cash and cash equivalents, are restricted in order to redeem the debt if necessary. The proceeds of all the notes are intended to be used to pay a portion of the cash consideration for the Merger, to repay certain indebtedness of Express Scripts and its subsidiaries and/or to pay related fees and expenses. Proceeds not required for these purposes may be used by New Cigna for general corporate purposes. Interest is payable semi-annually in the case of the fixed rate notes and quarterly in the case of the floating rate notes. Following closing of the Merger, the notes will be guaranteed by the Company and Express Scripts Holding Company (collectively “the Guarantors”), and guarantees will terminate when certain conditions are met, primarily when the debt issued by the Guarantors is collectively less than 20% of the debt issued by New Cigna and its subsidiaries in the aggregate.

Bridge Facility. In March 2018, in connection with the proposed Merger, the Company and New Cigna entered into a commitment letter (the “Commitment Letter”) with Morgan Stanley Senior Funding, Inc., The Bank of Tokyo-Mitsubishi UFJ, Ltd and 21 additional banks, to provide a $26.7 billion 364-day senior unsecured bridge facility (the “Bridge Facility”). The Bridge Facility commitment has been reduced to $3.9 billion as of September 30, 2018 after issuing the Notes in the third quarter of 2018 (described above) and entering into the Term Loan Credit Agreement (described below). The Bridge Facility commitment may be used to finance the Merger, repay certain existing Express Scripts debt or pay related fees and expenses.

The Bridge Facility contains customary covenants and restrictions, including a financial covenant that the Company or New Cigna may not permit its leverage ratio – which is the ratio of total consolidated debt to total consolidated capitalization – to be greater than 60%. These covenants and restrictions will apply only if New Cigna draws upon the Bridge Facility at closing. The Bridge Facility expires at the Merger closing if not drawn upon.

The Company accrued approximately $140 million in fees upon entering into the Commitment Letter. The Company paid $111 million during the nine months ended September 30, 2018 and expects to pay the remainder of the fees over the balance of 2018. The fees were capitalized in other assets and are being amortized to operating expenses over the period the Bridge Facility is outstanding. The Company recorded amortization of the Bridge Facility fees of $50 million during the three months and $135 million during the nine months ended September 30, 2018.

Revolving Credit Agreement. On April 6, 2018, in connection with the proposed Merger, the Company and New Cigna entered into the Revolving Credit and Letter of Credit Agreement (the “Revolving Credit Agreement”) that matures on April 6, 2023 and is diversified among 23 banks.

Prior to the Merger, the Company can borrow up to $1.5 billion for general corporate purposes, of which up to $500 million is available for the issuance of letters of credit. On and after the Merger, New Cigna can borrow up to $3.25 billion for general corporate purposes, of which up to $500 million is available for the issuance of letters of credit. The Revolving Credit Agreement also includes an option to increase the facility amount by up to $500 million and an option to extend the termination date for additional one year periods, subject to the consent of the banks.

The Revolving Credit Agreement contains customary covenants and restrictions, including a financial covenant that the Company or New Cigna may not permit its leverage ratio to be greater than 50% prior to the Merger or 60% after the Merger. Prior to the Merger, the debt issued in the third quarter of 2018 is excluded from determining the leverage ratio.

Term Loan Credit Agreement. On April 6, 2018, the Company and New Cigna entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) that is diversified among 26 banks. The Term Loan Credit Agreement provides for a three-year unsecured term loan facility in aggregate principal amount of $3.0 billion, which will be available to finance the Merger, repay certain existing indebtedness of Express Scripts, and pay fees and expenses in connection with the Merger.

The Term Loan Credit Agreement contains customary covenants and restrictions, including a financial covenant that the Company or, after the Merger, New Cigna may not permit its leverage ratio to be greater than 60%.

Prior to the Merger, the Company is the borrower under the Bridge Facility, the Revolving Credit Agreement and the Term Loan Credit Agreement. On and after the Merger, New Cigna will be the borrower under each of these agreements. In certain circumstances, certain subsidiaries of the Company or, after the Merger, New Cigna will be required to guarantee each other’s obligations under the Bridge Facility, the Term Loan Credit Agreement and the Revolving Credit Agreement.

The Company was in compliance with its debt covenants as of September 30, 2018.

In the third quarter of 2017, the Company completed a cash tender offer to purchase $1.0 billion of aggregate principal amount of certain of its outstanding debt securities. The Company recorded a pre-tax loss of $321 million ($209 million after-tax), consisting primarily of premium payments on the tender.