Aetna Inc., the health care benefits provider purchasing Coventry Health Care Inc. for $5.7 billion, obtained a $2 billion bridge loan to finance the acquisition.
Goldman Sachs Group Inc. and UBS AG are arranging the 364-day financing, Hartford, Connecticut-based Aetna said in a regulatory filing today.
Aetna will pay interest on the debt tied to ratings, the company said, which begins at one percentage point more than the London interbank offered rate when ratings are A3, A- and A- by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings, respectively. The rate increases by 0.25 percentage point if the grades deteriorate.
Fitch said in an Aug. 20 report that it would probably put its A- rating for Aetna’s unsecured debt on “negative outlook” when the deal closes next year. Moody’s said it may downgrade Aetna from Baa1, while S&P lowered the outlook for its A- grade to “stable” from “positive.”
Bridge facilities are short-term loans that usually mature in one year and are often used as backstops to bond offerings or longer-dated bank debt.