Symbion ends Q4 with 3.9x leverage, 'ample' liquidity for opportunities

By Paul Deckelman

New York, March 20 - Symbion Inc. ended the 2011 fourth quarter and fiscal year with what its senior executives consider "ample" liquidity to pursue acquisitions and other development activities, citing the impact of several financing transactions last year including a junk bond issue, the repurchase of some pay-in-kind toggle notes and a new revolving credit facility.

"The resulting capital structure repositions the balance sheet for growth and provides for substantial committed access to capital with the undrawn $50 million revolving credit facility," Richard E. Francis Jr., the Nashville-based short-stay surgical facilities operator's chairman and chief executive officer, declared Tuesday on its fourth-quarter and 2011 year-end conference call.

"These refinancing transactions substantially reduced our cash-flow requirements over the next few years and extended our maturity profile."

Enough financial firepower

"Our cash flow from operations in the next 12 to 18 months should sufficiently cover our debt service, therefore allowing us to use a combination of cash on the balance sheet and revolver to fund these growth opportunities," Francis said

Francis and the company's senior vice president and chief financial officer, Teresa F. Sparks, told analysts that the company has sufficient cash and borrowing capability.

"We've continued to maintain a very healthy balance of approximately $70 million of cash on the balance sheet, of which roughly $33 million is available for corporate use," Sparks said in answer to an analyst's query on possible acquisitions during the question-and-answer portion of the call following Francis' formal presentation.

"That, combined with the revolver, is sufficient and ample room to cover development opportunities that we hope to pursue this year."

A busy second quarter

The refinancing transactions took place in last year's second quarter, which ended June 30, 2011.

The company sold $350 million of 8% five-year senior secured notes, pricing them at 98.492 to yield 8 3/8% on June 7, 2011.

It used the roughly $344 million of net proceeds from that bond deal, along with $13.7 million of cash on hand, to repay all of its roughly $277 million of outstanding borrowings under its existing senior secured credit facilities and to repurchase $70.8 million of its $250.9 million of outstanding 11% (cash)/11¾%(PIK) toggle notes due 2015 from some holders of those notes.

The company simultaneously entered into a new $50 million senior secured "super-priority" revolving credit facility due December 2015 and issued new 8% senior PIK exchangeable notes due 2017 to holders of $85.4 million of the 2015 PIK toggle paper. The new PIK notes are exchangeable into common stock of Symbion's parent company, Symbion Holdings Corp.

As of Dec. 31, the company's long-term debt, net of current maturities, stood at $544.6 million, up from $507.2 million at the end of 2010. The latest debt figure included $341 million of the outstanding 8% senior secured notes - the company canceled $9 million of those bonds in exchange for issuing the holders $9.2 million of the new PIK exchangeables - along with $101.4 million of the new PIK exchangeables and the last $94.7 million of the old PIK notes, plus small amounts of other obligations.

In compliance with covenants

Francis said that as of the quarter's end, Symbion's senior secured leverage ratio of debt versus adjusted EBITDA was 3.9 times, fully 35% under the maximum 6.0 times ratio allowed by its credit facility covenants. The ratio is based on consolidated adjusted EBITDA of $76.1 million.

The company's consolidated interest coverage ratio was 2.593 times. The CEO called it "an ample cushion" to the 1.625 times minimum requirement.

Symbion generated cash flow from operations in 2011 of $67.5 million, compared with $66.9 million in 2010.

Francis, while declining to give specific data, told an analyst seeking color on the company's possible acquisition plans that in 2010, "we spent about $56 [million] to $58 million on acquisitions, with a very tight balance sheet."

He said that even with its improved liquidity and financial flexibility following last year's financing moves, "we're going to be very focused and very selective on transactions. We have ample capacity - ample management capacity [and] capital capacity to do that."

He added, "I think we've got a very good strategic plan relative to what we're looking for. So from a balance sheet standpoint, we feel like we've got more than adequate resources to execute a very aggressive plan for those things that present what we think are good value-creators for the company."

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