Centric Health obtains C$113.5 million of secured, subordinated loans

By Susanna Moon

Chicago, May 4 – Centric Health Corp. refinanced some debt with new five-year senior facilities and 5.5-year subordinated facilities, as announced Dec. 15.

Centric Health said it has now inked definitive agreements with a syndicate of lenders for up to C$113.5 million of loans consisting of C$100 million senior secured facilities and C$13.5 million secured subordinated term credit facilities with an upsizing option for C$125 million of total senior credit facilities.

The senior facilities consist of a C$20 million revolving credit facility, including a swingline sublimit of up to C$3 million; a C$60 million term loan facility; and a C$20 million limited revolving acquisition and capital expenditure term loan facility available in multiple draws, according to a company notice on Thursday.

The revolver may be upsized by another C$5 million, and the acquisition and capital expenditure term loan may be raised by up to $20 million more.

Interest on the senior loans will be Canadian prime rate plus 50 basis points to 325 bps, based on the company's total funded debt to EBITDA ratio.

For the subordinated facilities, the term loan may be fully drawn in one advance for a total of C$13.5 million, which accrues interest at a rate of 9% per year.

The company may prepay up to C$2 million of the amount drawn on the subordinated facilities by July 31 and can prepay other parts of the subordinated facilities 18 months after the agreement date without premium or penalty.

The company said on May 4 that it issued redemption notices for its C$25.9 million of 8 5/8% second-lien senior secured notes due April 18, 2018 and its C$27.5 million of 6.75% convertible notes due Oct. 31, 2017.

The credit facilities also will be used to refinance the company's C$35 million senior revolving credit facility and for potential acquisitions, capital expenditures, organic growth initiatives and general working capital and corporate purposes.

The company’s weighted average interest rate will likely be reduced to 5.25% from 6.7% with the refinancing of debt with a new five-year term facility, according to the company update on Thursday.

"This is the final step of our debt and balance sheet simplification strategy, an objective set out by the company in the interests of eliminating multiple debt instruments, reducing the cost of debt and, importantly, providing the company with financial flexibility and capacity to further its strategic goals,” David Cutler, the company’s president and chief executive officer, said in the press release.

“Notably, the debt reduction initiatives have resulted in annual finance charges being significantly reduced from $26.4 million in 2015 to a pro forma charge of less than $4.5 million assuming completion of the debt refinancing."

The senior facilities and the subordinate facilities require the company to maintain a total funded debt to EBITDA ratio of no more than 5.25 times, dropping to 3.5 times after Dec. 31, 2019, the company noted.

The company also has outstanding C$9.1 million of 6.5% convertibles due July 31, 2017 and C$5 million of 6% convertibles due April 30, 2018 that were issued in private placements. Both issues are in the money based on the current conversion prices of C$0.52 and C$0.46, respectively. Centric intends to negotiate early conversion of the notes. Centric stock closed at C$0.56 on Wednesday.

Centric Health is a Toronto-based health care business operating fulfilment centers in its specialty pharmacy division and providing surgical care through its surgical and medical centers division.

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