Debt deal­ings

Chains re­fi­nance amidst lower in­ter­est rates

Modern Healthcare - - THE WEEK IN HEALTHCARE - Paul Barr

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

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