New Issue: HCA sells $5.70 billion eight-, 10-year notes in three tranches

By Paul A. Harris

St. Louis, Nov. 9 - Hercules Holding II, the equity consortium that plans to acquire Nashville, Tenn.-based health care services company HCA Inc., priced $5.70 billion of bonds (B2/BB-) in three tranches on Thursday, according to an informed source.

A $1.0 billion tranche of eight-year senior secured second-lien notes priced at par to yield 9 1/8%, on the tight end of the 9¼% area price talk.

In addition a $3.20 billion tranche of 10-year senior secured second-lien notes priced at par to yield 9¼%, 12.5 basis points tighter than the 9 3/8% to 9½% price talk.

Finally, a $1.5 billion tranche of 10-year senior secured second-lien toggle notes priced at par to yield 9 5/8%, in the middle of the price talk that had the second-lien notes coming 25 to 50 basis points behind the 10-year secured notes. The toggle feature provides for a 75 basis point coupon step-up when the interest payments are made "in-kind" as opposed to in cash.

Citigroup, Banc of America Securities LLC, JP Morgan, Merrill Lynch, Deutsche Bank Securities and Wachovia Securities were joint bookrunners for the notes, which are being marketed via Rule 144A with registration rights and via Regulation S.

Proceeds will be used to help fund the leveraged buyout of the company by Hercules, a consortium comprised of Bain Capital, Kohlberg Kravis Roberts & Co., Merrill Lynch Global Private Equity and company founder Thomas F. Frist Jr.

Issuer:	Hercules Holding II LLC/HCA Inc.
Amount:	$5.7 billion
Bookrunners:	Citigroup, Banc of America Securities LLC, JP Morgan, Merrill Lynch, Deutsche Bank Securities, Wachovia Securities
Co-managers:	ABN Amro, Barclays Capital, BNP Paribas, Calyon Securities, GE Capital, Goldman Sachs & Co., HVB, ING, Mizuho, RBS
Trade date:	Nov. 9
Settlement date:	Nov. 17
Ratings:	Moody's: B2
	Standard & Poor's: BB-
Distribution:	Rule 144A with registration rights and Regulation S
Eight-year notes
Amount:	$1.0 billion
Maturity:	Nov. 15, 2014
Security description:	Senior secured second-lien notes
Coupon:	9 1/8%
Price:	Par
Yield:	9 1/8%
Spread:	449 bps
Call features:	Callable on Nov. 15, 2010 at 104.563, 102.281, par on and after Nov. 15, 2012
Equity clawback:	Until Nov. 15, 2009 for 35% at 109.125
Price talk:	9¼% area
10-year notes
Amount:	$3.20 billion
Maturity:	Nov. 15, 2016
Security description:	Senior secured second-lien notes
Coupon:	9¼%
Price:	Par
Yield:	9¼%
Spread:	462
Call features:	Callable after Nov. 15, 2011 at 104.625, 103.083, 101.542, par on and after Nov. 15, 2014
Equity clawback:	Until Nov. 15, 2009 for 35% at 109.25
Price talk:	9 3/8% to 9½%
Toggle notes
Amount:	$1.5 billion
Maturity:	Nov. 15, 2016
Security description:	Senior secured second-lien toggle notes
Coupon:	9 5/8%
Toggle feature:	75 basis points PIK coupon step-up
Price:	Par
Yield:	9 5/8%
Spread:	499 bps
Call features:	Callable on Nov. 15, 2011 at 104.813, 103.208, 101.604, par on and after Nov. 15, 2014
Equity clawback:	Until Nov. 15, 2009 for 35% at 109.625
Price talk:	25 to 50 bps behind the 10-year secured notes

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