| Item 1.01 |
Entry into a Material Definitive Agreement. |
On February 27, 2023, Humana Inc. (the “Company”) entered into an underwriting agreement (the “Underwriting Agreement”) with Barclays Capital Inc., Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, U.S. Bancorp Investments, Inc. and Wells Fargo Securities, LLC, as representatives of the several underwriters (together, the “Underwriters”), pursuant to which the Company agreed to issue and sell to the Underwriters $500 million aggregate principal amount of its 5.700% Senior Notes due 2026 (the “2026 Senior Notes”) and $750 million aggregate principal amount of its 5.500% Senior Notes due 2053 (the “2053 Senior Notes” and, together with the 2026 Senior Notes, the “Senior Notes”), in accordance with the terms and conditions set forth in the Underwriting Agreement. The 2026 Senior Notes were sold at a public offering price of 99.984% of the aggregate principal amount thereof and the 2053 Senior Notes were sold at a public offering price of 96.431% of the aggregate principal amount thereof.
The sale of the Senior Notes has been registered with the Securities and Exchange Commission (the “Commission”) in a registration statement on Form S-3, File No. 333-254041 (the “Registration Statement”). The terms of the Senior Notes are described in the Company’s Prospectus dated March 9, 2021, as supplemented by a final Prospectus Supplement dated February 27, 2023 as filed with the Commission on February 28, 2023, pursuant to Rule 424(b)(5) under the Securities Act of 1933, as amended (the “Securities Act”).
The Senior Notes are unsecured senior obligations of the Company and rank equally with all of the Company’s other unsecured, unsubordinated indebtedness. The 2026 Senior Notes bear interest at an annual rate of 5.700% and the 2053 Senior Notes bear interest at an annual rate of 5.500%. Interest on the 2026 Senior Notes is payable by the Company on March 13 and September 13 of each year, beginning on September 13, 2023. Interest on the 2053 Senior Notes is payable by the Company on March 15 and September 15 of each year, beginning on September 15, 2023. The 2026 Senior Notes mature on March 13, 2026 and the 2053 Senior Notes mature on March 15, 2053. The closing of the sale of the Senior Notes is expected to occur on March 13, 2023, subject to customary closing conditions. The Company estimates that the net proceeds from the sale of the Senior Notes, after deducting the Underwriters’ discounts and commissions and estimated offering expenses, will be approximately $1.211 billion.
The Underwriters and their affiliates have performed commercial banking, investment banking and advisory services for the Company from time to time for which they have received customary fees and expenses. The Underwriters and their affiliates may, from time to time, engage in transactions with and perform services for the Company in the ordinary course of their business. In addition, certain affiliates of the Underwriters are lenders under the Company’s revolving credit facility, 364-day credit facility and term loan, and the Underwriters or their affiliates may hold the Company’s existing senior notes for their own accounts.
The Company intends to use the net proceeds from the Senior Notes offering to repay outstanding amounts under its $500 million Delayed Draw Term Loan. Net proceeds from the Senior Notes offering in excess of the amount required to repay outstanding borrowings under its Delayed Draw Term Loan at the time the Senior Notes offering is completed will be used for general corporate purposes, which may include the repayment of borrowings under its commercial paper program. As of December 31, 2022, the outstanding balance under the Company’s Delayed Draw Term Loan was $500 million and the interest rate in effect on that outstanding balance was LIBOR plus 125 basis points.
A copy of the Underwriting Agreement is filed as Exhibit 1.1 to this Current Report on Form 8-K and is incorporated by reference herein. The description of the material terms of the Underwriting Agreement is qualified in its entirety by reference to such exhibit.