Bank of America committed to finance a $3.25 billion new credit facility that backs a $2.4 billion dividend to Health Management Associates' shareholders. The deal is expected to launch for syndication this week as a six-year, $500 million revolver and a seven-year, $2.75 billion term loan. Pricing could not be determined. It will secure HMA's existing $400 million of 6.125% senior notes. Its $588 million of convertible subordinated notes will also remain outstanding. A B of A spokeswoman declined comment.
The deal is being used to pay a special, one-time $10 cash dividend to shareholders, at a total cost of approximately $2.4 billion. Following the pay out, the company's regular quarterly $.06 dividend will be suspended indefinitely. The remainder of the financing will be used to repay existing amounts drawn on the company's revolver.
Moody's Investors Service rated the proposed credit Ba2 and assigned HMA a Ba3 corporate family rating. The Naples, Fla.-based hospital operator announced in August it is selling two psychiatric hospitals to Psychiatric Solutions for an undisclosed amount. Standard & Poor's assigned the credit a B+ rating with a recovery rating of 3, reflecting a dramatic increase in debt. The company's lease-adjusted debt to EBITDA will increase to about 5.5 times from 2.2 times after the transaction. Calls to Robert Farnham, cfo, were not returned.