Community Health talks term D, extended term C at Libor plus 375 bps

By Sara Rosenberg

New York, Jan. 8 - Community Health Systems Inc. launched on Wednesday its $2.26 billion seven-year term loan D and extended term loan C debt with price talk of Libor plus 375 basis points with a 1% Libor floor, according to a market source.

The term loan D is offered with an original issue discount of 99, and the extended debt is offered at a discount of 991/2, the source said.

The term loans have 101 soft call protection for six months.

Under the extension, the company is looking to push out the maturity on up to 50% of its term loan C, which would be around $1.7 billion of the currently $3.53 billion tranche, to 2021 from 2017, and that extended amount will be fungible with the term loan D.

Covenants in the term loans are maximum leverage and minimum interest coverage ratios, and maximum capital expenditures.

Commitments for the institutional debt are due on Jan. 17.

The company's credit facility (Ba2/BB) also includes a $1 billion five-year revolver and a $1 billion five-year term loan A.

Credit Suisse Securities (USA) LLC and Bank of America Merrill Lynch are the joint physical bookrunners on the deal, and Citigroup Global Markets Inc., Goldman Sachs Bank USA, J.P. Morgan Securities LLC, RBC Capital Markets, SunTrust Robinson Humphrey Inc., UBS Securities LLC and Wells Fargo Securities LLC are bookrunners as well.

Co-managers on the deal include Bank of Tokyo Mitsubishi, Compass Bank, Credit Agricole, Deutsche Bank Securities Inc., Fifth Third Securities and Scotia Bank.

Proceeds from the new term loan D, term loan A and revolver will be used to help fund the acquisition of Health Management Associates Inc. for $13.78 per share, consisting of $10.50 per share in cash plus 0.06942 of a share of Community Health common stock for each Health Management share, and to refinance existing debt.

The transaction is valued at about $7.6 billion, including the assumption of around $3.7 billion of debt.

In the summer, the company had said that it received a commitment for $2.26 billion of senior secured term loans and $4.58 billion of bridge loans to fund the acquisition.

The bridge loans were said to be split between a $2,375,000,000 unsecured tranche and a $2,205,000,000 secured tranche and would be reduced by any cash proceeds from notes issued.

Closing is expected by the end of January, subject to customary conditions, the receipt of regulatory approvals and the absence of certain adverse developments. Health Management stockholder approval has already been received.

With this transaction, the company is seeking to amend its existing senior secured credit agreement to add flexibility proportionate with its post-acquisition structure.

Community Health is a Nashville, Tenn.-based hospital company. Health Management is a Naples, Fla.-based owner and manager of hospitals and ambulatory surgery centers.

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