Community Health Systems capping a busy balance sheet year

By Paul Deckelman

New York, Dec. 12 - Community Health Systems Inc. has not only treated many thousands of patients this year in its more than 130 hospitals spread across the United States, it has also been doing quite a bit of surgery on its own balance sheet, cutting away near-maturing debt and giving itself considerably more financial flexibility.

"We've been really busy on our bond and credit agreement refinancing," the Franklin, Tenn.-based health care company's executive vice president and chief financial officer, W. Larry Cash, told participants at the 23rd annual Oppenheimer Healthcare Conference in New York on Wednesday.

"We started in November of 2010 with about a little under $9 billion of debt due in 2014 and 2015. You can see that our maturities have been pushed out to '17, '18 and '19 now."

In November of 2011, Community Health did a $1 billion of 8% senior notes due 2019 via its wholly owned subsidiary, CHS/Community Health Systems, Inc. This year alone, the company has paid several additional visits to the junk bond market, as it sold another $1 billion of the 8% notes in March, did a $1.2 billion issue of 7 1/8% senior notes due 2020 in July and brought a $1.6 billion tranche of 5 1/8% senior secured notes due 2018 in August.

The company used the proceeds from those various bond offerings to fund several tender offers for its 8 7/8% senior notes due 2015: $1 billion last November, $850 million in March and $934 million in July. After the last tender offer, it called the final $294.626 million of outstanding 2015 notes for redemption on Aug. 17.

The company was also active in the bank debt market. In February, it amended its existing credit agreement and extended a portion of its previously non-extended term loan, pushing the maturity of $1.6 billion of debt out to January 2017. The extended portion will carry a price of 350 basis points over Libor.

In March, it announced a new $750 million senior secured revolving credit facility and an incremental term loan A facility, both due in 2016 and carrying an interest rate of 250 bps over Libor.

Community Health Systems again amended its credit facility in August, pushing the maturity of $340 million of term loan B debt out to January of 2017.

During his presentation, Cash also noted that company had put a $300 million accounts receivable securitization program in place in March, adding, "We hope to add more to that sometime next year."

"We're doing a good job of working on our debt," he continued, with about 88% of the $9.472 billion of debt on the balance sheet as of Sept, 30 classified as fixed rate.

He said that guidance for the full year is 82% to 86% at a fixed rate, noting, "We've got a few hundred million dollars of [interest-rate ] swaps that roll off for the rest of the year as part of our variable-rate debt."

Community Health has about $700 million of availability on its revolver.

Cash said, "We have plenty of room under our covenants." The company's ratio of debt-to-capital is about 78%.

The company also announced a special dividend of 25 cents per share payable as of Dec. 28. The CFO said that this is the "first dividend we've ever announced since being public in 2000."

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