Chains refinance amidst lower interest rates
For-profit hospital operators were able to take advantage of a receptive market for corporate borrowing in recent weeks, refinancing almost $5.5 billion in debt. The companies that restructured their debt—health Management Associates, Community Health Systems, Franklin, Tenn., and Tenet Healthcare, Dallas—were seeking to lower the interest paid on their debt, extend maturities and better position themselves for potential acquisitions.
Health Management Associates, Naples, Fla., restructured $3.5 billion worth of debt, Community Health Systems refinanced $1 billion and Tenet Healthcare issued $900 million of debt.
The moves follow refinancing transactions by for-profit leader HCA in late summer and early fall, which added $1.2 billion in debt or debt capacity through the issuance of $5.5 billion worth of notes and the reworking of what is now a revolving credit facility of $2.5 billion.
Issuers were being opportunistic in taking advantage of relatively healthy demand from lenders and debt purchasers before the end of the year, said Jon Krieger, managing director in healthcare investment banking for Berkery Noyes, New York.
Corporate borrowers have learned to borrow when they can after extended periods of illiquidity, he said. “The debt markets had essentially been closed for a long time,” Krieger said, and with the economy improving, the ability to borrow has improved as well.
Indeed, executives at HMA had been talking about restructuring its debt for the past four to six months, waiting for a situation that was attractive to their financing needs, said Robert Farnham, senior vice president of finance, speaking this month at a Bank of America Merrill Lynch investor conference on the Web. (HMA executives didn’t return calls to discuss the company’s borrowing.)
With 75% of its borrowing structure made up of a single-term loan, the company was