After monitoring demand from the credit markets, Community Health Systems decided to take advantage of the current environment through an early refinancing of its bank facility. The former credit was set to mature in 2004, but the markets were favorable, in particular the "B" market, noted Jim Doucette, treasurer. As a result, the "B" piece was increased from $800 million at the start of syndication to $850 million to meet investor appetite, he said. The revolver, however, was reduced from $450 million to $350 million, although Doucette declined to say why.
Pricing is much improved on the new credit, with the "B" loan priced at LIBOR plus 21/ 2%. By comparison, the $644 million in former institutional loans, which were divided among four tranches, held spreads of up to 33/ 4% over LIBOR. Doucette noted that the strength of the market is one factor in the improved pricing, but he added that the Brentwood, Tenn., acute-care provider also has improved its financial statements. "Community Health has de-levered substantially through equity offerings and become much more profitable," he said. Pricing on the new revolver is set at LIBOR plus 21/ 4%.
J.P. Morgan andBank of America continue to serve as co-lead banks on the credit, with Wachovia Bank as documentation agent. The loan is rated Ba3/BB-, but institutional investors requested that Fitch Ratings supply an opinion as well, Doucette noted. Fitch assigned a BB rating.