Community Health lifts term loan D to $2.93 billion, reduces pricing

By Sara Rosenberg

New York, Jan. 14 - Community Health Systems Inc. upsized its seven-year term loan D to $2,925,000,000 from $2.26 billion and lowered pricing to Libor plus 325 basis points from Libor plus 375 bps, according to a market source.

In addition, the original issue discount on the term loan D was revised to 99½ from 99, the source said.

The company also cut pricing on the extension of up to 50% of its term loan C, which would be around $1.7 billion of the currently $3.53 billion tranche, to Libor plus 325 bps from Libor plus 375 bps and tightened the discount to 99¾ from 991/2, the source continued.

Furthermore, the term debt will now be covenant-light, as opposed to having maximum leverage and minimum interest coverage ratios, and a maximum capital expenditures requirement.

The term loan C extension will push out the maturity on the debt to 2021 from 2017, and that extended amount will be fungible with the term loan D.

Non-extending term loan C lenders have the option to either exchange their debt into a new covenant-light term loan E due January 2017 that is priced at Libor plus 325 bps with no floor and a par offer price, or be paid out at par.

Both the term loan D and the extended term loan C amounts still have a 1% Libor floor and 101 soft call protection for six months.

Commitments are due at noon ET on Thursday, accelerated from Friday, the source added.

The company's credit facility (Ba2/BB) also includes a $1 billion five-year revolver and a $1 billion five-year term loan A.

Credit Suisse Securities (USA) LLC and Bank of America Merrill Lynch are the joint physical bookrunners on the deal, and Citigroup Global Markets Inc., Goldman Sachs Bank USA, J.P. Morgan Securities LLC, RBC Capital Markets, SunTrust Robinson Humphrey Inc., UBS Securities LLC and Wells Fargo Securities LLC are bookrunners as well.

Co-managers on the deal include Bank of Tokyo Mitsubishi, Compass Bank, Credit Agricole, Deutsche Bank Securities Inc., Fifth Third Securities and Scotia Bank.

Proceeds from the new term loan D, term loan A and revolver will be used to help fund the acquisition of Health Management Associates Inc. for $13.78 per share, consisting of $10.50 per share in cash plus 0.06942 of a share of Community Health common stock for each Health Management share, and to refinance existing debt.

The transaction is valued at about $7.6 billion, including the assumption of around $3.7 billion of debt.

Closing is expected by the end of January, subject to customary conditions, the receipt of regulatory approvals and the absence of certain adverse developments. Health Management stockholder approval has already been received.

Community Health is a Nashville, Tenn.-based hospital company. Health Management is a Naples, Fla.-based owner and manager of hospitals and ambulatory surgery centers.

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