WellCare ups bank facility to $1 billion after $1.2 billion note sale

By Devika Patel

Knoxville, Tenn., March 14 – WellCare Health Plans, Inc. says its management feels “really good about the balance sheet,” following an expansion of the company’s credit facility and a $1.2 billion sale of eight-year 5¼% senior notes.

“As we looked at the markets, and looked at our debt position, and we had $900 million due in 2020, we decided it was an opportunistic time for Wellcare to go out and borrow $1.2 billion,” executive vice president and chief financial officer Drew Asher said at the Barclays Global Healthcare Conference in Miami on Tuesday.

“[We had] meaningful interest in our company from bond investors, which we appreciate.

“We were able to place $1.2 billion of senior notes.” Asher said.

Following the notes sale, Asher said, the company also expanded its credit facility, adding an additional $700 million of undrawn capacity.

“Part and parcel to that, we also took the opportunity to expand our credit facility to $1 billion,” he said.

“When we started our credit facility was $300 million.

“We pushed it up to $850 [million] and now it’s $1 billion with the strong support of our bank syndicate.

“We did that in tandem and those will close in the next week or two,” Asher said.

“We’ll have $1 billion of untapped credit facility to deploy on opportunities for growth in this space.

“We feel really good about the balance sheet; it’s night and day from early 2014 and those two things together will cost us $0.16 in 2017.

“Given our view on performance as a company, we can absorb that into our existing guidance,” Asher said.

Notes

On March 8, the company priced a $1.2 billion issue of eight-year senior notes (Ba2/BB) at par to yield 5¼%.

The yield printed at the wide end of 5% to 5¼% yield talk. Initial guidance was in the 5% area.

J.P. Morgan Securities LLC, SunTrust Robinson Humphrey Inc., Wells Fargo Securities LLC, Goldman Sachs & Co., BofA Merrill Lynch and MUFG were the joint bookrunners for the public offer.

The Tampa, Fla.-based provider of government-sponsored managed care services plans to use the proceeds to redeem or repay $900 million of its 5¾% senior notes due 2020, to repay amounts outstanding from time to time under its revolving credit facility and for general corporate purposes, including organic growth and working capital.

Credit facility

On Jan. 12, WellCare. entered into an up to $850 million senior unsecured revolving credit facility with administrative agent JPMorgan Chase Bank, NA.

Of the $850 million, up to $150 million is available for letters of credit.

The credit agreement also provides for the opportunity to increase the total amount of the revolver and/or obtain incremental term loans in an amount up to $200 million.

Borrowings bear interest at Libor plus 150 basis points to 200 bps, based on the company’s ratio of total debt to cash flow. The unused fee ranges from 25 bps to 35 bps.

Commitments under the facility expire on Jan. 8, 2021.

At closing, WellCare borrowed $200 million as a revolving loan.

Proceeds may be used for general corporate purposes.

The credit agreement includes financial covenants that include a maximum total net debt to cash flow ratio and a minimum interest expense and principal payment coverage ratio.

Bank of America, NA, MUFG Union Bank, NA, SunTrust Bank and Wells Fargo Bank, NA are co-syndication agents; Goldman Sachs Bank USA and U.S. Bank NA are co-documentation agents; and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Inc., MUFG, SunTrust Robinson Humphrey, Inc. and Wells Fargo Securities, LLC are joint bookrunners and lead arrangers.

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