LifePoint Hospitals has tapped Citigroup to lead the financing backing its $1.7 billion acquisition of Province Healthcare Co. because of Citi's strength in banking and strong healthcare group, according to Michael Culotta, LifePoint's senior v.p. and cfo. "[Citi] really understands [healthcare]," Culotta said. "That is why we felt very, very comfortable with them."
The financing is slated as all bank debt. But depending on the market, the company will be looking at both convertibles and high yield, Culotta noted. "[The credit facility] gave us the flexibility to have something locked in place but at the same time gave us the flexibility to not only have it there but look at other areas of financing that we can get into should we need to," he added.
The loan is structured as a $400 million revolver and $1.325 billion "B" loan. Both tranches are being offered at LIBOR plus 2 1/4%, but the revolver will be based on a grid tied to leverage that ranges from LIBOR plus 1 1/4-2 1/4%. If the company opts to do a bond deal, the size of the term loan would be decreased, Culotta said.
LifePoint currently has $30 million outstanding on a $200 million revolver and $221 million of outstanding 4.5% converts that convert at $47.36. Fleet Bank, now Bank of America, was the previous lead arranger. Province has $75.4 million outstanding on a $250 million revolver, $200 million outstanding on 7 1/2% senior subordinated notes due 2013, $76 million outstanding on 4 1/2% convertible subordinated notes due 2005 and $172.5 million outstanding on 4 1/4% convertible subordinated notes due 2008. All of that debt is being refinanced with the transaction. Citi bankers declined comment.