Humana, has renewed its $265 million, 364-day revolver, which is the shorter-term piece of a $530 million credit program. The Louisville, Ky-based health benefits company's other facility is a four-year, $265 million revolver that expires in October 2005. The revolvers are in place for back up liquidity, working capital, and dry powder for strategic opportunities, explained Alan Bailey, assistant treasurer and head of capital markets for Humana. The revolvers can be used to back acquisitions, but Bailey noted that there is nothing in the pipeline at this time.
One of the advantages of the 364-day facility is that banks have an opportunity to revisit their credit exposure on an annual basis, stated Bailey. The banks get to reconsider half of their exposure in Humana's case. The 364-day facility is also a way for banks to lower their fees to the customer, he added. Pricing on the 364-day piece is tied to a grid based on ratings and at the current level the loan carries a 20 basis point unused fee and a drawn spread of 105 basis point over LIBOR. The four-year revolver carries a 25 basis point unused fee and a 1% drawn spread over LIBOR, Bailey explained. Both of the revolvers are undrawn at this time, but the company has drawn down on its 364-day facility in the past. Most recently, however, Humana paid down the outstanding amount with part of the proceeds from a $300 million, 6.3% senior unsecured note issue completed in August.
The syndicate comprises 11 banks with J.P. Morgan serving as the administrative agent. Bailey said J.P. Morgan has been the company's long-time lead bank. "We think they are the best at it," he said. Bank of America, Citigroup and Wachovia Securities are the syndication agents for the deal. J.P. Morgan and B of A are also the joint book-running managers for the senior notes.