Psychiatric Solutions has jumped back into the market for an amended and restated credit facility, increasing its loans by $300 million. The deal, led by Citigroup and Banc of America Securities, will be used to fund the $210 million acquisition of Alternative Behavioral Services from FHC Health Systems.
The company is looking to increase its existing term loan and existing revolver by $150 million each. Pricing for the add-ons will be the same as the existing credit, according to a banker. The company's existing deal from July 2005 consisted of a $150 million term loan "B" priced at LIBOR plus 2% and a $150 million revolver priced at LIBOR plus 2 1/2% (LMW, 7/8/2005). One existing lender said that pricing looks a little tight considering they are bringing up the leverage and keeping the original spread. The company's debt leverage could not be determined.
PSI announced in May it would acquire ABS for approximately $250 million, but terminated the agreement in early October citing certain significant issues and changes that resulted in material adverse effects on ABS' operations and financial results. These issues and changes could not be determined. FHC announced the same day it would file a lawsuit against PSI for breaching its obligations under the purchase agreement. FHC claimed PSI was "wrongfully and secretly" working to delay closing the transaction while seeking to reduce the agreed upon purchase price. The lawsuit stated that FHC would hold PSI to its original purchase price of $250 million. Under the new purchase agreement, this lawsuit has been dismissed. Calls to Brent Turner, executive v.p. finance and administration, and a FHC spokesman were not returned.
Moody's Investors Service downgraded the existing credit to Ba3 from Ba2 based on the increase in long-term debt. Franklin, Tenn.-based PSI operates 64 owned or leased psychiatric inpatient facilities that offer behavioral health programs to critically ill children, adolescents and adults. ABS, headquartered in Norfolk, Va., is a provider of wrap-around programs in community-based and residential settings to assist children, adolescents, adults and their families overcome behavioral health challenges.