HealthSouth Corp.'s revolver rallied right up under par and was quoted in the 98-99 context last week following the company's business update presentation. Traders said the bank debt climbed in part due to the sentiment that HealthSouth would eventually refinance that revolver and because of the loan's relatively rich interest rate. Most importantly, however, the company was able to reassure stakeholders that HealthSouth's business is on the right track and that the leverage is manageable, explained one buysider.
The loan had been slowly ticking up since the financial fraud at HealthSouth was revealed last March. The paper was quoted in the low 90s toward the end of last year. The company has about $374 million on its revolver. HealthSouth has also recently completed a new $355 million, seven-year senior subordinated term loan led by Credit Suisse First Boston. The loan pays an interest rate of 103/8% per annum and is not callable until year three. Lenders were also given warrants to purchase 10 million shares in HealthSouth. That loan was quoted in the 105-106 context.
Joel Gordon, acting chairman of the board of HealthSouth, and Bob May, acting ceo, were on hand for the presentation held at the offices of J.P. Morgan last week. Professionals from the turnaround firm Alvarez & Marsal, who are working on HealthSouth's restructuring also presented. These speakers included Byran Marsal, founding managing director of Alvarez & Marsal and chief restructuring officer for HealthSouth; Guy Sansone, a managing director of Alvarez & Marsal and cfo; and George Varughese, a managing director at Alvarez & Marsal. Calls to Sansone were not returned by press time