Kindred lifts pricing on $700 million term B to Libor plus 375 bps

By Sara Rosenberg

New York, March 25 - Kindred Healthcare Inc. increased the spread on its $700 million seven-year term loan B (B+) to Libor plus 375 basis points from Libor plus 350 bps and set the Libor floor at 1.5%, the wide end of the 1.25% to 1.5% talk, according to a market source.

The original issue discount of 99 and 101 soft call protection for one year were left unchanged.

Included in the B loan is a 375 bps ticking fee, the source said.

The company's $1.3 billion senior secured credit facility also includes a $600 million five-year asset-based revolver priced at Libor plus 250 bps.

J.P. Morgan Securities LLC, Morgan Stanley & Co. Inc. and Citigroup Global Markets Inc. are the lead banks on the deal.

Covenants under the term loan include a maximum total adjusted leverage ratio, a minimum fixed-charge coverage ratio and maximum capital expenditures, while revolver covenants include a minimum fixed-charge coverage ratio and maximum capital expenditures.

Proceeds will be used to help fund the acquisition of RehabCare Group Inc., a St. Louis-based provider of physical rehabilitation services.

Under the terms of the agreement, each stockholder of RehabCare common stock will receive $26.00 per share in cash and 0.471 of a share of Kindred common stock. The equity for the transaction is around $228 million.

The transaction is valued at $1.3 billion, including $400 million of existing debt.

The adjusted leverage of the combined company is projected to be about 4.5 times at the end of 2011, roughly the same as Kindred's stand-alone adjusted leverage at the close of 2010.

Kindred expects the combined company to achieve operating synergies of $40 million within a period of two years following closing, with $25 million expected in the first year after closing.

Based on pro forma financial projections, revenues for the combined company are expected to be $6.2 billion for the year ending Dec. 31, 2011. Pro forma EBITDA of the combined company is expected to range from $470 million to $487 million.

Closing on the acquisition is expected on or about June 30, subject to approvals by the stockholders of both companies, completion of financing, clearance under the provisions of the Hart-Scott-Rodino Act of 1976 and the receipt of licensure and regulatory approvals.

Kindred Healthcare is a Louisville, Ky.-based health care services company.

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