New Issue: Vanguard Health Systems sells $700 million proceeds in two parts

By Paul A. Harris

St. Louis, Sept. 17 - Vanguard Health Systems Inc. sold $700 million proceeds of high-yield bonds via subsidiaries on Friday, according to a syndicate source.

Vanguard Health Holding Co. II LLC and Vanguard Holding Co. II Inc. priced an upsized $575 million of 10-year senior subordinated notes (Caa1/CCC+) at par to yield 9%.

Price talk was in the 9% area. The issue was upsized from $560 million.

Meanwhile, Vanguard Health Holding Co. I LLC and Vanguard Health Holding Co. I Inc. priced a downsized $216 million of 11-year senior discount notes (Caa2/CCC+) at 57.713 to yield 11¼%.

Price talk was 200 to 225 basis points behind the senior subordinated notes. Proceeds of the sale were $124.7 million, down from $140 million.

Citigroup and Banc of America Securities ran the books for the Rule 144A issue. The co-managers were Bear Stearns & Co., JP Morgan, Merrill Lynch & Co., ABN Amro and Wachovia Securities.

Proceeds and an equity contribution from an investor group will be used to fund the acquisition of the company, to repurchase the company's existing 9¾% senior subordinated notes due 2011 and to repay its senior secured credit facilities.

Vanguard Health Systems is a Nashville, Tenn., owner/operator of healthcare delivery networks in urban markets.

Company:	Vanguard Health Systems Inc.
Amount:	$700 million proceeds
Bookrunners:	Citigroup, Banc of America Securities
Co-managers:	Bear Stearns & Co., JP Morgan, Merrill Lynch & Co., ABN Amro, Wachovia Securities
Pricing date:	Sept. 17
Settlement date:	Sept. 23
Issuer:	Vanguard Health Holding Co. II LLC/Vanguard Holding Co. II Inc.
Amount:	$575 million (increased from $560 million)
Maturity:	Oct. 1, 2014
Security description:	Senior subordinated notes
Coupon:	9%
Price:	Par
Yield:	9%
Spread:	490 basis points
Call features:	Make-whole call at Treasuries plus 50 basis points until Oct. 1, 2009 then callable at 104.50, 103, 101.50, par on or after Oct. 1, 2012
Equity clawback:	Until Oct. 1, 2007 for 35% at 109.0
Ratings:	Moody's: Caa1
	Standard & Poor's: CCC+
Price talk:	9% area
Issuer:	Vanguard Health Holding Co. I LLC/Vanguard Health Holding Co. I Inc.
Face amount:	$216 million
Proceeds:	$124.7 million (decreased from $140 million)
Maturity:	Oct. 1, 2015
Security description:	Senior discount notes
Coupon:	Zero until Oct. 1, 2009, then steps up to 11¼%
Price:	57.713
Yield:	11¼%
Spread:	715 basis points
Call features:	Make-whole call at Treasuries plus 50 basis points until Oct. 1, 2009, the callable at 105.625, 103.75, 101.875, par on or after Oct. 1, 2012
Equity clawback:	Until Oct. 1, 2007 for 35% at 111.25 accreted
Ratings:	Moody's: Caa2
	Standard & Poor's: CCC+
Price talk:	200-225 basis points behind the senior subordinated notes

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