Accredo Health recently obtained a $325 million credit facility through Bank of America to fund its acquisition of Gentiva Health Services. Joel Kimbrough, cfo, said the timing of the new financing encouraged the Memphis-based company to choose its long-time lead bank. Accredo had to secure the underwriting commitment from B of A in early January because the Gentiva deal stipulated that the completion of the acquisition could not be contingent on whether the company obtained the necessary financing, he explained, noting that the credit was syndicated afterwards.
The company needed a credit facility large enough to provide $220 million for the acquisition and to refinance its $60 million revolving credit coming due next year. The new facility comprises a five-year, $125 million revolver, a five-year, $75 million term loan "A" and a seven-year, $125 million "B" term loan. Pricing on all the tranches is based on a grid tied to leverage and currently are set at LIBOR plus 23/ 4%. The former $60 million revolver was priced at LIBOR plus 3%.
Kimbrough attributed the reduction in price to the way the deal was syndicated and the popularity of the new credit. The company's former credit line was a club deal. But the new facility was syndicated, with roughly 35 banks and institutions picking up the exposure. In addition, the new facility was oversubscribed, leading to a 25 basis points flex down on the "B" tranche, he noted. Although this loan marks a sizable increase from the company's previous credit line, Accredo is comfortable with leverage of 2.4 times and interest coverage of approximately six to seven times on a pro-forma basis, he said.