HealthSpring launches $250 million term loan B at Libor plus 450 bps

By Sara Rosenberg

New York, Sept. 22 - HealthSpring Inc. launched its $250 million six-year term loan B on Wednesday with price talk of Libor plus 450 basis points with a 1.5% Libor floor and an original issue discount of 981/2, according to a market source.

There is 101 soft call protection for one year on the B loan, the source said.

The company's $400 million of new bank debt (Ba3/B+) also includes a $150 million term loan A due Feb. 11, 2015.

JPMorgan and Bank of America are the joint lead arrangers and bookrunners on the deal, and Raymond James Bank is a co-arranger.

There is a $75 million accordion feature.

Financial covenants include a minimum consolidated statutory net worth and a maximum consolidated total leverage ratio of 2.25 times, with step-downs to be determined.

Proceeds will be used to help fund the acquisition of Bravo Health Inc., a Baltimore-based operator of Medicare Advantage coordinated care plans, for $545 million.

In connection with the acquisition, the company expects to amend its existing credit facility to allow for the new term loans.

The company's existing credit facility consists of a $175 million revolver and a $175 million term loan A.

The plan is to draw $100 million under the currently undrawn revolver, and those funds, along with the new term loans and unrestricted cash, will finance the acquisition.

At close, leverage on a pro forma EBITDA basis is anticipated to be 1.6 times, and debt to capital is expected in the mid- to high 30s.

Also, assuming the transaction closes as anticipated, the transaction should add $0.45 to $0.55 to HealthSpring's 2011 earnings per share, after taking into account expected cost savings.

Closing on the acquisition is expected by year-end, subject to customary conditions, including federal and state regulatory approvals.

HealthSpring is a Nashville, Tenn.-based Medicare Advantage coordinated care plans.

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