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WBMD » Topics » Certain Developments

This excerpt taken from the WBMD 8-K filed Jul 2, 2009.
Certain Developments
 
  •  Termination of Proposed HLTH Merger.  In February 2008, HLTH and WebMD entered into an Agreement and Plan of Merger (which we refer to as the Merger Agreement), pursuant to which HLTH would merge into WebMD (which we refer to as the HLTH Merger), with WebMD continuing as the surviving corporation. Pursuant to the terms of a Termination Agreement entered into on October 19, 2008 (which we refer to as the Termination Agreement), HLTH and WebMD mutually agreed, in light of the turmoil in financial markets, to terminate the Merger Agreement. The Termination Agreement maintained HLTH’s obligation, under the terms of the Merger Agreement, to pay the expenses WebMD incurred in connection with the merger. In connection with the termination of the merger, HLTH and WebMD amended the Tax Sharing Agreement between them and HLTH assigned to WebMD the Amended and Restated Data License Agreement, dated as of February 8, 2008, among HLTH, EBS Master LLC and certain affiliated companies. For additional information, see “Transactions with HLTH — Agreements with HLTH” below.
 
  •  Impairment of Auction Rate Securities; Non-Recourse Credit Facility.  We hold investments in auction rate securities (which we refer to as ARS) backed by student loans, which are 97% guaranteed under the Federal Family Education Loan Program (FFELP), and all had credit ratings of AAA or Aaa when purchased. Historically, the fair value of our ARS investments approximated par value due to the frequent auction periods, generally every 7 to 28 days, which provided liquidity to these investments. However, since February 2008, virtually all auctions involving these securities have failed. As a secondary market has yet to develop, these investments have been reclassified to long-term investments as of December 31, 2008. The result of a failed auction is that these ARS will continue to pay interest in accordance with their terms at each respective auction date; however, liquidity of the securities will be limited until there is a successful auction, the issuer redeems the securities, the securities mature or until such time as other markets for these ARS investments develop. We concluded that the estimated fair value of the ARS no longer approximated the par value due to the lack of liquidity.
 
As of March 31, 2008, we concluded the fair value of our ARS was $141,044, compared to a face value of $168,450. The impairment in value, or $27,406 was considered to be other-than-temporary, and accordingly, was recorded as an impairment charge within the statement of operations during the three months ended March 31, 2008. During 2008, we received $4,400 associated with the partial redemption of certain of our ARS holdings which represented 100% of their face value. As a result, as of December 31, 2008, the total face value of our ARS holdings was $164,800, compared to a fair value of $133,563. Subsequent to March 31, 2008, through December 31, 2008, we further reduced the carrying value of our ARS holdings by $4,277. Since this reduction in value resulted from fluctuations in interest rate assumptions, we assessed this reduction to be temporary in nature and, accordingly, this amount has been recorded as an unrealized loss in our stockholders’ equity. We continue to monitor the market for ARS as well as the individual ARS investments we own. We may be required to record additional losses in future periods if the fair value of our ARS holdings deteriorates further.
 
In May 2008, we entered into a non-recourse credit facility (which we refer to as the Credit Facility) with Citigroup that is secured by our ARS holdings (including, in some circumstances, interest payable on the ARS holdings), that will allow us to borrow up to 75% of the face amount of the ARS holdings pledged as collateral under the Credit Facility. The Credit Facility is governed by a loan agreement, dated as of May 6, 2008, containing customary representations and warranties of the borrower and certain affirmative covenants and negative covenants relating to the pledged collateral. Under the loan agreement, the borrower and the lender may, in certain circumstances, cause the pledged collateral to be sold, with the proceeds of any such sale required to be applied in full immediately to repayment of amounts borrowed. No borrowings have been made under the Credit Facility to date. Borrowings can be made under this Credit Facility until May 2009. The interest rate applicable to such borrowings is one-month LIBOR plus 250 basis points. Any borrowings outstanding under the Credit Facility after March 2009 become demand loans, subject to 60 days notice, with recourse only to the pledged collateral.


4

 

These excerpts taken from the WBMD 10-K filed Feb 27, 2009.
Certain Developments
 
  •  Termination of Proposed HLTH Merger.  In February 2008, HLTH and WebMD entered into an Agreement and Plan of Merger (which we refer to as the Merger Agreement), pursuant to which HLTH would merge into WebMD (which we refer to as the HLTH Merger), with WebMD continuing as the surviving corporation. Pursuant to the terms of a Termination Agreement entered into on October 19, 2008 (which we refer to as the Termination Agreement), HLTH and WebMD mutually agreed, in light of the turmoil in financial markets, to terminate the Merger Agreement. The Termination Agreement maintained HLTH’s obligation, under the terms of the Merger Agreement, to pay the expenses WebMD


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  incurred in connection with the merger. In connection with the termination of the merger, HLTH and WebMD amended the Tax Sharing Agreement between them and HLTH assigned to WebMD the Amended and Restated Data License Agreement, dated as of February 8, 2008, among HLTH, EBS Master LLC and certain affiliated companies. For additional information, see “Transactions with HLTH — Agreements with HLTH” below.
 
  •  Impairment of Auction Rate Securities; Non-Recourse Credit Facility.  We hold investments in auction rate securities (which we refer to as ARS) backed by student loans, which are 97% guaranteed under the Federal Family Education Loan Program (FFELP), and all had credit ratings of AAA or Aaa when purchased. Historically, the fair value of our ARS investments approximated par value due to the frequent auction periods, generally every 7 to 28 days, which provided liquidity to these investments. However, since February 2008, virtually all auctions involving these securities have failed. As a secondary market has yet to develop, these investments have been reclassified to long-term investments as of December 31, 2008. The result of a failed auction is that these ARS will continue to pay interest in accordance with their terms at each respective auction date; however, liquidity of the securities will be limited until there is a successful auction, the issuer redeems the securities, the securities mature or until such time as other markets for these ARS investments develop. We concluded that the estimated fair value of the ARS no longer approximated the par value due to the lack of liquidity.
 
As of March 31, 2008, we concluded the fair value of our ARS was $141,044, compared to a face value of $168,450. The impairment in value, or $27,406 was considered to be other-than-temporary, and accordingly, was recorded as an impairment charge within the statement of operations during the three months ended March 31, 2008. During 2008, we received $4,400 associated with the partial redemption of certain of our ARS holdings which represented 100% of their face value. As a result, as of December 31, 2008, the total face value of our ARS holdings was $164,800, compared to a fair value of $133,563. Subsequent to March 31, 2008, through December 31, 2008, we further reduced the carrying value of our ARS holdings by $4,277. Since this reduction in value resulted from fluctuations in interest rate assumptions, we assessed this reduction to be temporary in nature and, accordingly, this amount has been recorded as an unrealized loss in our stockholders’ equity. We continue to monitor the market for ARS as well as the individual ARS investments we own. We may be required to record additional losses in future periods if the fair value of our ARS holdings deteriorates further.
 
In May 2008, we entered into a non-recourse credit facility (which we refer to as the Credit Facility) with Citigroup that is secured by our ARS holdings (including, in some circumstances, interest payable on the ARS holdings), that will allow us to borrow up to 75% of the face amount of the ARS holdings pledged as collateral under the Credit Facility. The Credit Facility is governed by a loan agreement, dated as of May 6, 2008, containing customary representations and warranties of the borrower and certain affirmative covenants and negative covenants relating to the pledged collateral. Under the loan agreement, the borrower and the lender may, in certain circumstances, cause the pledged collateral to be sold, with the proceeds of any such sale required to be applied in full immediately to repayment of amounts borrowed. No borrowings have been made under the Credit Facility to date. Borrowings can be made under this Credit Facility until May 2009. The interest rate applicable to such borrowings is one-month LIBOR plus 250 basis points. Any borrowings outstanding under the Credit Facility after March 2009 become demand loans, subject to 60 days notice, with recourse only to the pledged collateral.
 
Certain
Developments


 
















  • 
Termination of Proposed HLTH Merger.  In
February 2008, HLTH and WebMD entered into an Agreement and Plan
of Merger (which we refer to as the Merger Agreement), pursuant
to which HLTH would merge into WebMD (which we refer to as the
HLTH Merger), with WebMD continuing as the surviving
corporation. Pursuant to the terms of a Termination Agreement
entered into on October 19, 2008 (which we refer to as the
Termination Agreement), HLTH and WebMD mutually agreed, in light
of the turmoil in financial markets, to terminate the Merger
Agreement. The Termination Agreement maintained HLTH’s
obligation, under the terms of the Merger Agreement, to pay the
expenses WebMD





51




Table of Contents



















 

incurred in connection with the merger. In connection with the
termination of the merger, HLTH and WebMD amended the Tax
Sharing Agreement between them and HLTH assigned to WebMD the
Amended and Restated Data License Agreement, dated as of
February 8, 2008, among HLTH, EBS Master LLC and certain
affiliated companies. For additional information, see
“Transactions with HLTH — Agreements with
HLTH” below.


 
















  • 
Impairment of Auction Rate Securities; Non-Recourse Credit
Facility.  We hold investments in auction rate
securities (which we refer to as ARS) backed by student loans,
which are 97% guaranteed under the Federal Family Education Loan
Program (FFELP), and all had credit ratings of AAA or Aaa when
purchased. Historically, the fair value of our ARS investments
approximated par value due to the frequent auction periods,
generally every 7 to 28 days, which provided liquidity to
these investments. However, since February 2008, virtually all
auctions involving these securities have failed. As a secondary
market has yet to develop, these investments have been
reclassified to long-term investments as of December 31,
2008. The result of a failed auction is that these ARS will
continue to pay interest in accordance with their terms at each
respective auction date; however, liquidity of the securities
will be limited until there is a successful auction, the issuer
redeems the securities, the securities mature or until such time
as other markets for these ARS investments develop. We concluded
that the estimated fair value of the ARS no longer approximated
the par value due to the lack of liquidity.


 



As of March 31, 2008, we concluded the fair value of our
ARS was $141,044, compared to a face value of $168,450. The
impairment in value, or $27,406 was considered to be
other-than-temporary, and accordingly, was recorded as an
impairment charge within the statement of operations during the
three months ended March 31, 2008. During 2008, we received
$4,400 associated with the partial redemption of certain of our
ARS holdings which represented 100% of their face value. As a
result, as of December 31, 2008, the total face value of
our ARS holdings was $164,800, compared to a fair value of
$133,563. Subsequent to March 31, 2008, through
December 31, 2008, we further reduced the carrying value of
our ARS holdings by $4,277. Since this reduction in value
resulted from fluctuations in interest rate assumptions, we
assessed this reduction to be temporary in nature and,
accordingly, this amount has been recorded as an unrealized loss
in our stockholders’ equity. We continue to monitor the
market for ARS as well as the individual ARS investments we own.
We may be required to record additional losses in future periods
if the fair value of our ARS holdings deteriorates further.


 



In May 2008, we entered into a non-recourse credit facility
(which we refer to as the Credit Facility) with Citigroup that
is secured by our ARS holdings (including, in some
circumstances, interest payable on the ARS holdings), that will
allow us to borrow up to 75% of the face amount of the ARS
holdings pledged as collateral under the Credit Facility. The
Credit Facility is governed by a loan agreement, dated as of
May 6, 2008, containing customary representations and
warranties of the borrower and certain affirmative covenants and
negative covenants relating to the pledged collateral. Under the
loan agreement, the borrower and the lender may, in certain
circumstances, cause the pledged collateral to be sold, with the
proceeds of any such sale required to be applied in full
immediately to repayment of amounts borrowed. No borrowings have
been made under the Credit Facility to date. Borrowings can be
made under this Credit Facility until May 2009. The interest
rate applicable to such borrowings is one-month LIBOR plus
250 basis points. Any borrowings outstanding under the
Credit Facility after March 2009 become demand loans, subject to
60 days notice, with recourse only to the pledged
collateral.


 




EXCERPTS ON THIS PAGE:

8-K
Jul 2, 2009
10-K (2 sections)
Feb 27, 2009

RELATED TOPICS for WBMD:

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