HealthSouth price talk surfaces on $3.85 billion credit facilities

By Sara Rosenberg

New York, Feb. 3 - Spread guidance on HealthSouth Corp.'s $3.85 billion in bank debt emerged on Friday as the company filed the loan commitment letter with the Securities and Exchange Commission.

The $2.55 billion in senior secured bank debt, which includes a $2.05 billion term loan B and a $500 million revolver, is talked at Libor plus 225 basis points if the deal is rated with a stable outlook at B1/B+ or better, and Libor plus 250 basis points if the deal is rated lower than B1/B+, the document said.

The $1.3 billion senior unsecured interim term loan will carry an initial interest rate of Libor plus 450 basis points. After six months, the interest rate will increase by 100 basis points, and then will increase by 50 basis points every three months thereafter.

Both the senior secured credit facility and the interim loan will be launched into syndication via a bank meeting that is scheduled to take place on Thursday.

J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Merrill Lynch & Co. are joint lead arrangers and joint bookrunners on the senior secured credit facility, with J.P. Morgan on the left.

Merrill Lynch & Co., Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. are joint bookrunners on the unsecured interim loan, with Merrill Lynch on the left.

Deutsche Bank Securities Inc., Goldman, Sachs & Co. and Wachovia Capital Markets LLC are co-managers on both the senior secured credit facility and the senior unsecured interim loan.

The $1.3 billion unsecured interim term loan will likely be refinanced in the first or second quarter of 2006 through an issuance of predominantly debt securities, as well as equity securities.

However, in order to issue any form of public debt to take out the interim loan, the company must first become current on all of its financial filings with the Securities and Exchange Commission.

Proceeds from the credit facility and the interim facility will be used to prepay substantially all of the company's existing debt.

In connection with the recapitalization, HealthSouth commenced a cash tender offer to purchase all $2.03 billion of outstanding senior notes and $319 million senior subordinated notes.

The company will also amend its $200 million senior unsecured term loan and $355 million senior subordinated term loan credit agreements to, among other things, allow for the prepayment of each of these term loans.

HealthSouth is a Birmingham, Ala., provider of outpatient surgery, diagnostic imaging and rehabilitative health care services.

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