Laboratory Corp. of America gained cheaper pricing on the company's new $300 million Credit Suisse First Boston-led credit after Standard & Poor's upgraded the company from BBB to BBB+ in January. Pamela Sherry, v.p. of investor relations at the Burlington, N.C.-based company, said the facility fee and spread on the new loans are tied to the company's senior credit rating. Spreads on both the $200 million, three-year revolver and the $100 million, 364-day facility are LIBOR plus 1% with facility fees of 12.5 basis points and 17.5 basis points, respectively. "The upgrade is based off an increased recognition of diagnostic testing in health care," Sherry stated, explaining the growing importance of the field within health care. The sub-sector carries a higher profile, she clarified. "Only 3-4% of health care spending is in diagnostics, but this helps drive 80% of medical decisions," she added. Sherry declined comment on savings resulting from the upgrade.
The new facility refinances a CSFB line set to mature this year. The old facility included term debt until last September, when the term loans were taken out by $500 million in Liquid Yield Option Notes due 2021, said Sherry. The Merrill Lynch LYON product provides a more flexible debt-structure than term loans, she noted, though she declined further comment on the merits of the LYONs. Wachovia Securities, UBS Warburg, Bank of America and Deutsche Bank are syndication agents for the new lines. The company has gained kudos from the rating agency for embracing genomic testing and commercializing new diagnostic technologies.