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 12/31/2016
Short-Term Debt P-2 12/31/2016
Outlook Stable 12/31/2016
STANDARD & POOR’S
Debt Type Rating Date
Long-Term Debt BBB+ 12/31/2016
Short-Term Debt A-2 12/31/2016
Outlook Stable 12/31/2016

Borrowing & Credit Agreements

In millions (as of December 31, 2016)   Rate
Commercial paper 1,874
Deferred payments 9.2
Current Portion of Mortgages 0
Current Portion of Capital Leases 21
Senior notes due 2018 2250 1.90%
Senior notes due 2018 1250 2.25%
Senior notes due 2019 850 2.25%
Senior notes due 2020 2750 2.80%
Senior notes due 2021 550 4.125%
Senior notes due 2021 1750 2.125%
Senior notes due 2022 1500 3.50%
Senior notes due 2022* 399 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* 299 5.00%
Senior notes due 2025 2828 3.875%
Senior notes due 2025* 0 3.75%
Senior notes due 2026 1750 2.875
Senior notes due 2027 372 6.25%
Senior notes due 2035 652 4.875%
Senior notes due 2035* 0 3.25%
Senior notes due 2039 447 6.125%
Senior notes due 2041 133 5.75%
Senior notes due 2043 750 5.30%
Senior notes due 2045 3500 5.125%
Mortgage notes payable 2
Capital lease obligations 627
Debt premiums 33
Other (Amortizable Debt Fees) (228)
Total debt principal $27,470
Less: (194.92)
Current portion of long-term debt 41.9
Commercial paper 1873.9
Total long-term borrowings $25,615

*Omnicare note

Short-term borrowings - The Company had approximately $1.9 billion of commercial paper outstanding at a weighted average interest rate of 1.22% as of December 31, 2016. In connection with its commercial paper program, the Company maintains 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 December 31, 2016, there were no borrowings outstanding under the back-up credit facilities.

On January 3, 2017, the Company entered into a $2.5 billion revolving credit facility. The credit facility allows for borrowings at various rates that are dependent, in part, on the Company’s debt ratings and require the Company to pay a weighted average quarterly facility fee of approximately 0.03%, regardless of usage. The maximum available under the credit facility decreases by $750 million on both March 31, 2017 and June 30, 2017 and by $500 million on September 30, 2017. The credit facility expires on December 31, 2017.

On May 20, 2015, in connection with the acquisition of Omnicare, the Company entered into a $13 billion unsecured bridge loan facility. The Company paid approximately $52 million in fees in connection with the facility. The fees were capitalized and amortized as interest expense over the period the bridge facility was outstanding. The bridge loan facility expired on July 20, 2015 upon the Company’s issuance of unsecured senior notes with an aggregate principal of $15 billion as discussed below. The bridge loan facility fees became fully amortized in July 2015.

Long-term borrowings - 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 approximately $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 consolidated statement of income for the year ended December 31, 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. Approximately $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 wrote off $4 million of unamortized deferred financing costs, for a total loss on early extinguishment of debt of $101 million during the year ended December 31, 2016.

The Company recorded a total loss on the early extinguishment of debt of $643 million which was recorded in the income from continuing operations in the consolidated statement of income for the year ended December 31, 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