SCHEDULE: KKR Secures $300M Margin Loan on Henry Schein Shares

KKR entities have secured a $300 million margin loan collateralized by 15.26 million shares of Henry Schein, Inc., representing a 14.5% stake.

Summary

• KKR Hawaii Holdings L.P. and its affiliates, collectively referred to as the Reporting Persons, filed an Amendment No. 4 to their Schedule 13D regarding their beneficial ownership in Henry Schein, Inc.
• The Reporting Persons beneficially own an aggregate of 17,583,918 shares of Henry Schein, Inc. Common Stock, representing approximately 14.5% of the outstanding shares as of July 28, 2025.
• This beneficial ownership includes 15,263,662 shares held directly by KKR Hawaii Holdings L.P., 1,931,886 shares that KKR Hawaii Aggregator L.P. has the right to acquire via total return swaps (June Swap and August Swap), and 388,370 shares held directly by MH Sub I, LLC.
• KKR Hawaii Holdings L.P. entered into a Margin Loan Agreement on August 14, 2025, borrowing $300,000,000 from lenders including UBS AG Stamford Branch and Mizuho Securities USA LLC.
• The loan is secured by a pledge of 15,263,662 shares of Henry Schein, Inc. Common Stock owned by KKR Hawaii Holdings L.P.
• The Margin Loan Agreement is expected to mature on or about August 14, 2028.
• The initial hedge period for the August Swap was completed on August 12, 2025, setting the notional shares at 1,874,538 at a notional price of $66.19 per share.

Sentiment

Score: 4

Explanation: The filing discloses a significant margin loan, which provides liquidity to KKR but introduces substantial risk to the underlying Henry Schein shares due to potential collateral calls and forced sales if the stock price declines. This adds a layer of financial leverage and potential volatility to the stock, which is generally viewed with caution by investors.

Positives

• KKR's continued significant beneficial ownership (14.5%) in Henry Schein, Inc. indicates a long-term strategic interest in the company.
• The margin loan provides KKR with access to substantial capital ($300 million) without divesting its equity stake in Henry Schein, allowing for potential reinvestment or other strategic uses.

Negatives

• The use of a margin loan introduces significant financial risk, as a decline in Henry Schein's share price could trigger collateral calls or forced liquidation of the pledged shares.
• The complexity of the KKR ownership structure and the various entities involved may obscure the ultimate risk exposure and decision-making processes.

Risks

• Collateral Shortfall: A decline in the LTV Ratio below the LTV Margin Call Level could trigger a demand for additional collateral or prepayment of the loan.
• Market Disruption Events: Events like Early Closure, Exchange Disruption, or Trading Disruption could impair the ability to determine share prices or effect transactions, potentially leading to adverse adjustments or mandatory prepayments.
• Changes in Law: New laws, regulations, or interpretations could increase the cost of maintaining the advances or reduce the amount receivable by lenders, leading to increased costs for the borrower.
• Insolvency Events: Bankruptcy or similar proceedings involving the Borrower, General Partner, or any Fund Entity could lead to immediate acceleration of the loan.
• Failure to Perfect Liens: Any failure of the Security Agreements to create a valid first-priority lien on the collateral could result in an Event of Default.
• Material Share Restrictions: Imposition of new transfer restrictions or restrictive conditions on the collateral shares could materially reduce the proceeds from foreclosure or delay the ability to realize such proceeds.
• Material Nonpublic Information: Possession of Material Nonpublic Information by the Borrower could lead to disclosure requirements by lenders, potentially impacting market perception.
• Judgments: Significant monetary or non-monetary judgments against the Borrower or General Partner could trigger an Event of Default.
• ERISA Plan Assets: If the assets of the Borrower or General Partner constitute ERISA Plan assets, it could lead to non-exempt prohibited transactions and penalties.

Future Outlook

The Margin Loan Agreement has an expected maturity date of August 14, 2028. The agreement also outlines provisions for potential future advances (Accordion Advance) and conditions for their funding, which could increase the total loan amount up to a Maximum Facility Amount (details in Additional Terms Letter).

Industry Context

This filing primarily details a financial transaction by a major private equity firm, KKR, related to its existing investment in Henry Schein, Inc., a global distributor of healthcare products and services. It reflects KKR's strategy to leverage its equity holdings to access liquidity, rather than indicating specific trends within the dental or medical supply industry itself. Such margin loans are a common financial tool for large investors to optimize capital structure and liquidity.

Related Party Transactions

• The Margin Loan Agreement is between KKR Hawaii Holdings L.P. (a KKR entity) and a syndicate of lenders, including UBS and Mizuho, which are financial institutions that may have other relationships with KKR or Henry Schein.
• KKR Hawaii Aggregator L.P. entered into a total return swap with Nomura, another financial institution.
• KKR Hawaii Holdings L.P. contributed 15,263,662 shares of Common Stock to KKR Hawaii Holdings L.P. (an internal KKR transaction) in connection with the Margin Loan Agreement.

Stakeholder Impact

• Shareholders of Henry Schein, Inc. could face increased volatility and potential downward pressure on the stock price if KKR is forced to sell pledged shares due to collateral calls or loan default.
• Lenders (UBS, Mizuho) are exposed to the credit risk of KKR Hawaii Holdings L.P. and the market risk of Henry Schein, Inc. shares, mitigated by the collateral pledge and contractual protections.
• KKR entities gain liquidity from their Henry Schein investment without divesting, potentially enabling new investments or other strategic initiatives.

Next Steps

• The Margin Loan Agreement is expected to mature on or about August 14, 2028.
• Borrower may request additional 'Accordion Advances' at any time after the Delayed Funding Date and prior to the sixteenth-month anniversary of the Closing Date, subject to terms and conditions.

Key Dates

Keywords

Henry Schein, KKR, Schedule 13D, Margin Loan, Beneficial Ownership, Collateralized Loan, Private Equity, Financial Reporting, SEC Filing, Corporate Finance