Fixed Income Information

CVS Health Corporation typically funds its operations through internally generated cash flow and commercial paper as well as through borrowings under various committed and uncommitted lines of credit. Our strong balance sheet has allowed us at times to enter the capital markets to fund acquisitions. This section provides details in regard to our financing.

Credit Ratings

MOODY’S
Debt Type Rating Date
Long-Term Debt Baa1 12/31/2014
Short-Term Debt P-2 12/31/2014
Outlook Stable 12/31/2014
STANDARD & POOR’S
Debt Type Rating Date
Long-Term Debt BBB+ 12/31/2014
Short-Term Debt A-2 12/31/2014
Outlook Stable 12/31/2014

Borrowing & Credit Agreements

In millions (as of June 30, 2016)   Rate
Deferred payments 9.2
Current Portion of Mortgages 0.4
Current Portion of Capital Leases 22.1
Senior notes due 2017 1080 5.75%
Senior notes due 2018 2250 1.90%
Senior notes due 2018 1250 2.25%
Senior notes due 2019 394 6.60%
Senior notes due 2019 850 2.25%
Senior notes due 2020 450 4.75%
Senior notes due 2020 2750 2.80%
Senior notes due 2021 550 4.125%
Senior notes due 2022 1500 3.50%
Senior notes due 2022 400 4.75%
Senior notes due 2022 1250 2.75%
Senior notes due 2023 1250 4.00%
Senior notes due 2024 650 3.375%
Senior notes due 2024 300 5.00%
Senior notes due 2025 3000 3.875%
Senior notes due 2025* 0 3.75%
Senior notes due 2027 453 6.25%
Senior notes due 2035 2000 4.875%
Senior notes due 2035* 6 3.25%
Senior notes due 2039 734 6.125%
Senior notes due 2041 493 5.75%
Senior notes due 2043 750 5.30%
Senior notes due 2045 3500 5.125%
Mortgage notes payable 2
Long-term acquisition payments 9
Capital lease obligations 619
Total debt principal $27,470
Debt premiums 37
Debt discounts and deferred financing costs 261
Total Borrowings $26,267
Less:
Current portion of long-term debt 1170.5
Total long-term borrowings $27,438

*Omnicare note

We had $745 million of commercial paper outstanding at a weighted average interest rate of 0.68% as of June 30, 2016. In connection with our commercial paper program, we maintain a $1.0 billion, five-year unsecured back-up credit facility, which expires on May 23, 2018, a $1.25 billion, five-year unsecured back-up credit facility, which expires on July 24, 2019, and a $1.25 billion, five-year unsecured back-up credit facility, which expires on July 1, 2020. The credit facilities allow for borrowings at various rates that are dependent, in part, on the Company’s public debt ratings and require the Company to pay a weighted average quarterly facility fee of approximately 0.03%, regardless of usage. As of June 30, 2016, there were no borrowings outstanding under the back-up credit facilities.

Our back-up credit facilities and unsecured senior notes contain customary restrictive financial and operating covenants. These covenants do not include a requirement for the acceleration of our debt maturities in the event of a downgrade in our credit rating. We do not believe the restrictions contained in these covenants materially affect our financial or operating flexibility.

On May 16, 2016, the Company issued $1.75 billion aggregate principal amount of 2.125% unsecured senior notes due June 1, 2021 and $1.75 billion aggregate principal amount of 2.875% unsecured senior notes due June 1, 2026 (collectively, the "2016 Notes") for total proceeds of approximately $3.5 billion, net of discounts and underwriting fees. The 2016 Notes pay interest semi-annually and may be redeemed, in whole at any time, or in part from time to time, at the Company's option at a defined redemption price plus accrued and unpaid interest to the redemption date. The net proceeds of the 2016 Notes were used for general corporate purposes and to repay certain corporate debt.

On May 16, 2016, the Company announced tender offers for (1) any and all of its 5.75% Senior Notes due 2017, its 6.60% Senior Notes due 2019 and its 4.75% Senior Notes due 2020 (collectively, the “Any and All Notes”) and (2) up to $1.5 billion aggregate principal amount of its 6.25% Senior Notes due 2027, its 6.125% Senior Notes due 2039, its 5.75% Senior Notes due 2041, the 5.00% Senior Notes due 2024 issued by its wholly-owned subsidiary, Omnicare, Inc. (“Omnicare”), the 4.75% Senior Notes due 2022 issued by Omnicare, its 4.875% Senior Notes due 2035 and its 3.875% Senior Notes due 2025 (collectively, the “Maximum Tender Offer Notes” and together with the Any and All Notes, the “Notes”). On May 31, 2016, the Company increased the aggregate principal amount of the tender offers for the Maximum Tender Offer Notes to $2.25 billion. The Company purchased $835 million aggregate principal amount of the Any and All Notes and $2.25 billion aggregate principal amount of the Maximum Tender Offer Notes pursuant to the tender offers, which expired on June 13, 2016. The Company paid a premium of $486 million in excess of the debt principal in connection with the purchase of the Notes, wrote off $50 million of unamortized deferred financing costs and incurred $6 million in fees, for a total loss on the early extinguishment of debt of $542 million which was recorded in income from continuing operations in the condensed consolidated statements of income for the three and six months ended June 30, 2016.

On June 27, 2016, the Company notified the holders of the remaining Any and All Notes that the Company was exercising its option to redeem the outstanding Any and All Notes pursuant to the terms of the Any and All Notes and the Indenture dated as of August 15, 2006, between the Company and The Bank of New York Mellon Trust Company, N.A. $1.1 billion aggregate principal amount of Any and All Notes was redeemed on July 27, 2016. The Company paid a premium of $97 million in excess of the debt principal and will record a loss on early extinguishment of debt of approximately $102 million during the three months ending September 30, 2016.

Sale-leaseback Transactions

As part of our strategy to increase the number of freestanding stores, we have created a Preferred Developer Program. This program is intended to provide us with a more cost effective means to finance the construction of prime new real estate locations. Previously, developers would use their own credit standing to fund the construction of new sites, which they would then lease to CVS Health. Under this program, CVS Health works together with a set of "preferred developers" to develop new sites using our own superior credit rating to achieve a lower all-in cost. Upon completion of a portfolio of stores, we typically use sale-leaseback transactions to refinance the stores, in the process broadening our funding sources. The properties are sold and the resulting leases qualify and are accounted for as operating leases. The Company does not have any retained or contingent interests in the stores, nor does the Company provide any guarantees, other than a guarantee of lease payments, in connection with the sale-leasebacks. Currently, some 60% of our new locations are constructed through the Preferred Developer Program.

Debt Maturity Schedule

Debt maturity schedule