Chemed Corp. found the right combination of institutional and commercial banks while amending its credit agreement last month, said David Williams, cfo. The Cincinnati-based company, which operates VITAS Healthcare Corp, a provider of end-of-life hospice care and Roto-Rooter, a plumbing and drain cleaning service, selected J.P. Morgan to lead the deal based on a previous relationship with Bank One. "I was a skeptic about [a possible] clash of cultures; Bank One which is a traditional banking culture and then J.P. Morgan which is an institutional bank," Williams said. "[But] they coordinated exceptionally well. [We] tapped the institutional market through J.P. Morgan and were able to flex down in the market."
To sweeten the deal on the revolver, the company held about one-third of the term loan and offered it to those banks in the revolver syndicate, including Citibank, Bank of America and LaSalle Bank.
The oversubscribed facility consists of an $85 million term loan priced at LIBOR plus 2% and a $175 million, five-year revolver at LIBOR plus 2 1/2%. The prior deal was for $35 million on the term loan and $100 million on the revolver. Cashing in on favorable interest rates was a key reason for the refinancing. "We put cash to work and extended credit," Williams said. The company cut its pricing by 2% on the term loan and 1 1/2% on the revolver.
In mid-December, VITAS acquired the assets of Premier Hospice and Palliative Care which added approximately 220 patients to VITAS hospice network. Williams said the company is going to use the funds for possible future acquisitions within both sectors, although it does not have any specific companies in mind.
With two very separate businesses under one company, one lender said some investors were also slightly skeptical. "Last year when the deal went out, there was a question of, can they manage two different companies?" he said. Some looked at it as a risk and some thought it was a positive because of diversification. A year later the company proved they could do the job, which led to a lot of interest among bankers and investors."