HCA term loans rise on possible paydown; Dean Foods, DaVita stronger with quarterly numbers

By Sara Rosenberg

New York, Feb. 11 - HCA Inc. saw its term loans head higher on Wednesday as the company announced a bond offering that could be used to repay some bank debt and announced an amendment that, if approved, could result in some additional bank debt being taken out.

Other names that saw levels tick upward over the course of the day included Dean Foods Co. and DaVita Inc., with the positive momentum attributed to the companies' favorable quarterly results.

HCA trades up

HCA's term loan A and term loan B were both trading better during the session on news of a possible paydown with proceeds from the sale of notes and on news of a proposed credit facility amendment, according to a trader.

The term loan A was quoted at 89 bid, 90 offered, up from Tuesday's levels of 87½ bid, 88 offered, and the term loan B was quoted at 86 bid, 87 offered, up from 84½ bid, 85 offered, the trader remarked.

On Wednesday morning, HCA announced that it would be coming to market with a $300 million senior secured second-lien notes offering.

The company said that proceeds from the offering would be used to repay existing debt, which may include borrowings under its term loan, revolver and/or asset-based credit facility.

The company went on to say that any proceeds not used to repay bank debt can be used to repay other existing senior unsecured debt.

HCA seeks amendment

HCA also announced on Wednesday that it will attempt to amend its asset-based revolver and its term loan and revolving credit facilities to allow for the incurrence of more debt.

According to an 8-K filed with the Securities and Exchange Commission, the additional debt that the company is seeking permission for would be secured by a lien that ranks equally with the lien securing the term loan and revolving credit facilities.

This additional debt would only be allowed to be used for the repayment of other debt that is secured on a similar basis.

HCA is a Nashville-based owner and operator of hospitals and surgery centers.

Dean Foods gains ground

Dean Foods' term loan B was also a little better in the secondary market, with one trader citing good earnings as the reason.

The term loan B was quoted at 88½ bid, 91½ offered, up about a quarter to a half a point on the day, the trader said.

For the fourth quarter, the company reported net income of $66.4 million, or $0.43 per diluted share, compared to net income of $32.6 million, or $0.24 per diluted share, in the comparable period last year.

Adjusted net income for the quarter was $71.3 million, or $0.46 per diluted share, compared to adjusted net income of $37.1 million, or $0.27 per diluted share, in the fourth quarter of 2007.

Net sales for the quarter were $3.1 billion, down from $3.2 billion last year.

"By many measures, the fourth quarter of 2008 was the strongest in our history. Consolidated adjusted operating income was 27% above the fourth quarter of 2007," said Gregg Engles, chairman and chief executive officer, in a new release.

"Consistent with the trends we were seeing as we exited the third quarter, commodities continued to be favorable in the fourth quarter, particularly energy related commodities, which, combined with operational improvements across the business, bolstered our financial results in the period," Engles continued in the release.

Dean Foods generates record free cash flow

For the year ended Dec. 31, Dean Foods' free cash flow was the highest in its history at $462 million. This was an increase of $353 million over the $109 million of free cash flow in 2007.

And, net cash provided by continuing operations for the 12 months totaled $719 million, compared to $350 million in 2007.

"Our strong cash flow combined with our equity offering in February 2008 led to the reduction of $783 million in debt during the year, significantly deleveraging the balance sheet," Engles added in the release.

Total debt at Dec. 31, net of $36 million in cash on hand, was about $4.45 billion.

The company's funded debt to EBITDA ratio declined to 4.92 times as of the end of the fourth quarter. The current bank covenant requirement is 5.75 times, stepping down to 5.0 times at year-end 2009.

Dean Foods provides outlook

Also on Wednesday, Dean Foods said that it is expecting adjusted diluted earnings of at least $0.38 per share for the first quarter of 2009.

For the full year, the company expects to deliver mid-teens earnings-per-share growth, which implies adjusted diluted earnings of at least $1.50 per share.

Dean Foods is a Dallas-based food and beverage company.

DaVita strengthens on earnings

DaVita's term loan B inched its way to stronger ground on Wednesday following the company's release of fourth-quarter numbers, according to a trader.

The term loan B was quoted at 93 bid, 94 offered, up from previous levels of 92½ bid, 93½ offered, the trader said.

The trader explained that earnings were good, but there was not a giant leap in bank debt trading levels since there's not much higher it can go at this point.

DaVita net income climbs

For the quarter ended Dec. 31, DaVita reported net income of $98.4 million, or $0.94 per share, as compared to $85.7 million, or $0.79 per share, for the same period of 2007.

Net operating revenues for the fourth quarter were $1.5 billion, compared to $1.4 billion last year.

In addition, operating cash flow for the quarter was $184 million and free cash flow was $145 million.

The company also said that its operating income guidance for 2009 remains unchanged at a range of $820 million to $880 million.

DaVita is an El Segundo, Calif.-based provider of dialysis services for patients suffering from chronic kidney failure.

LCDX dips slightly

LCDX 10 was a touch softer on Wednesday, even though stocks ended the day slightly higher, according to a trader.

The index was quoted at 74.55 bid, 74.80 offered, down from 74.70 bid, 75 offered, the trader said.

Nasdaq closed up 5.77 points, or 0.38%; the NYSE closed up 37.97 points, or 0.73%; the S&P 500 closed up 6.58 points, or 0.80%; and the Dow Jones Industrial Average closed up 50.65 points, or 0.64%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.