Vanguard Health Systems selected Citigroup and Bank of America to lead a new $545 million credit facility that cuts pricing and increases available cash. The facility refinances $183.1 million outstanding under the previous credit led by B of A and Morgan Stanley. "We typically send out a request for proposal to several lenders and then we select those who can give us the best execution and best terms," said Joseph Moore, Vanguard's cfo and executive v.p., explaining the choice of the two lead bookrunners and syndication agents. "This time Citigroup and B of A were the best," he added.
Moore said Vanguard did not request a proposal from Morgan Stanley on the new facility, but he declined to provide further details about this decision. A Morgan Stanley spokesman declined comment on whether the bank had offered to participate.
Although Vanguard's previous facility was expiring in two years, the company decided to profit from the low interest rates available in the market. "The interest rates are as good as they have probably been in a long time so we thought it was the right time," Moore noted. The new facility consists of a five-year, $245 million revolver and a seven year, $300 million "B" loan. The term loan is priced at LIBOR plus 2-2 1/4%, which is 2% less than under the previous credit facility. The revolver is priced at LIBOR plus 1 3/4 - 2 3/4%, which is 50 basis points cheaper than the previous line. The interest rate is based on a grid tied to leverage. The previous facility consisted of a $125 million revolver and a $150 million "B" loan.
In addition to lowered costs, the refinancing enables Vanguard to extend the maturity of its revolver and double the size of its term loan. Vanguard now has approximately $100 million of available cash, Moore said. GE Capital, La Salle Bank, National Association and Wachovia Securities are co-documentation agents. Other banks and institutions listed on the credit agreement are ABN Amro, Merrill Lynch Capital, Bear Stearns, BNP Paribas, First Tennessee Bank and The Sumitomo Trust and Banking Co.