J.P. Morgan and Bank of America are in the market with a $1.25 billion redux for Community Health Systems, a Forstmann Little & Co. firm, and are looking for a major price cut on the institutional tranches. The current "A," "B" and "C" tranches are priced at LIBOR plus 3%, 3 1/2% and 3 3/4%, respectively. But the banks want to roll those lines into one $800 million "B" tranche priced at LIBOR plus 2 1/2%. A $450 million revolver is also being refinanced, said a banker. Community Health operates full-service, acute care hospitals in nonurban areas where CHS is typically the prominent primary health care provider.
The attempted reprice is coming off the back of good performance figures for the quarter. EBITDA for the first quarter of 2002 was $92.4 million, compared with $77.2 million for the same period last year, representing a 19.6% increase. But the existing bank debt is rated B+, and despite some equity offerings, leverage remains high as the company continues to acquire aggressively, according to a Standard & Poor's report.
Calls to Larry Cash, executive v.p. and cfo and were referred to a spokeswoman, who was unable to provide comment by press time. Officials at B of A and J.P. Morgan did not return calls.