By Paul Deckelman
New York, July 26 - HCA, Inc. massively upsized its already large two-part drive-by bond deal on Tuesday, coming in with one of the biggest junk deals ever, a $5 billion behemoth, junk market sources said.
The deal was first announced at mid-day Eastern time as a $1 billion two-part issue and then was hurriedly shopped around to potential buyers via an afternoon investor call. It then priced late in the day after the stock market had closed and junk trading had wound down.
In between, its size was greatly pumped up, with sources seeing a $3.15 billion tranche of 8.5-year senior secured first-lien notes (Ba2/BB) and $2 billion of 10.5-year senior unsecured notes (B3/B-). When the final pricing took place, the secured tranche had been trimmed slightly from those estimates to an even $3 billion, with the unsecured piece coming in at $2 billion.
The total size makes it both the biggest junk deal of the year, surpassing the $3.2 billion of bonds that Chrysler Group LLC sold in a two-part offering of senior secured eight- and 10-year paper in mid-May, and one of the biggest junk deals ever.
HCA, a unit of HCA Holdings, Inc., a Nashville-based operator of hospitals and other medical facilities such as freestanding surgery centers, diagnostic and imaging centers, radiation and oncology therapy centers and rehabilitation and physical therapy centers, initially announced that the proceeds from the originally planned $1 billion deal would be used to redeem and repurchase $900 million of its $1.58 billion of outstanding 9⅝%/10⅜% second-lien toggle notes due 2016.
When the issue was heard to have been greatly upsized, the sources said that the company was also planning to redeem its 9¼% senior secured second-lien cash-pay notes due 2016. HCA sold $3.2 billion of the cash-pays and the $1.5 billion of the toggle notes in the same November 2006 bond deal, pricing both at par.
Both tranches of the new bonds priced at par late Tuesday. The secured bonds priced to yield 6½%, and the unsecured bonds priced to yield 7½%. Both came at the wide end of price talk for the respective tranches: 6 3/8% to 6½% for the secured bonds and 7 3/8% to 7½% for the unsecured issue.
The bonds are being sold in an offering registered with the Securities and Exchange Commission. Neither tranche is callable, and there is no equity clawback provision. Holders of both are protected by a 101 change-of-control put provision.
The bonds were brought to market via joint book-running managers J.P. Morgan Securities LLC, Barclays Capital Inc., Bank of America Merrill Lynch, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Wells Fargo Securities LLC.
| Issuer: | HCA, Inc. (subsidiary of HCA Holdings, Inc.)
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| Amount: | $5 billion (upsized from originally announced $1 billion)
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| Bookrunners: | J.P. Morgan Securities LLC, Barclays Capital Inc., Bank of America Merrill Lynch, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Wells Fargo Securities LLC
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| Call features: | Non-callable
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| Change-of-control put: | 101%
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| Trade date: | July 26
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| Settlement date: | Aug. 1
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| Distribution: | SEC-registered offering
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| Marketing: | Quick-to-market, pricing followed mid-day new-deal announcement
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| Tranche 1
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| Amount: | $3 billion
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| Maturity: | Feb. 15, 2020
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| Securities: | Senior secured first-lien notes
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| Coupon: | 6½%
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| Price: | Par
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| Yield: | 6½%
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| Spread: | 386 basis points versus Treasuries
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| Ratings: | Moody's: Ba2
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| Standard & Poor's: BB
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| Price talk: | 6 3/8% to 6½%
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| Tranche 2
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| Amount: | $2 billion
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| Maturity: | Feb. 15, 2022
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| Securities: | Senior notes
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| Coupon: | 7½%
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| Price: | Par
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| Yield: | 7½%
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| Spread: | 455 bps versus Treasuries
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| Ratings: | Moody's: B3
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| Standard & Poor's: B-
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| Price talk: | 7 3/8% to 7½%
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