Community Health Services' 6.5% '12 notes jumped nearly eight points last Monday from 95 to 103 after it announced a deal to purchase Triad Hospitals for $6.8 billion. Its term loan "B" slipped slightly from the 100.604-101.021 context to 100.396-100.875, according to Markit data. Triad's 7% '12s were trading at 104 and its 7% '13s were trading around 104 3/4 last Wednesday, unchanged from levels before the announcement.
In a conference call Wednesday the companies said outstanding debt will be taken out as part of the transaction. According to a KDP Advisor report, the tender price for Triad's bonds is unclear. Community Health could choose not to use the make-whole option, according to the report. If the fixed charge coverage test in the debt incurrence limitation is not triggered by the transaction, CHS could offer to repurchase the bonds at the 101 change of control price or if no one takes them up on the offer, CHS could call the notes at 103.5 in May '08 and November '09, the report says. Calls to spokesmen for both companies were not returned.
The two acute care hospital managers unveiled the plan last Monday. Triad had nixed a previous merger agreement with a consortium led by CCMP Capital Advisors and GS Capital Partners and paid a termination fee of approximately $40 million, according to a Securities and Exchange Commission filing. CHS has obtained commitments from Credit Suisse and Wachovia Securities for up to $6.95 billion in senior secured financing and $3.365 billion of either bridge financing or senior notes, according to the filing.
CHS came back to the market for a $300 million add-on to its existing "B" term loan in November (CIN, 11/27). The add-on was priced the same as the existing debt, at LIBOR plus 1 3/4%, and JPMorgan, Wachovia Securities and Bank of America lead the deal.