Well-being enhancement company Healthways (HWAY - Analyst Report) recently revealed that it concluded the refinancing of its senior credit facilities. The earlier facilities were scheduled to terminate in December 2013. Those facilities have now been replaced with new ones comprising a 5-year term loan amounting to $200 million and an additional revolving credit facility worth $200 million.
The current facilities are now priced at Libor plus an additional margin of 250 basis points. The term loan is scheduled to amortize at 5% for the first 2 years, 7.5% in year 3 and 10% after that. The revolving credit facility had an initial amount of $106 million.
The earnings guidance issued earlier by the company did not take into account the monetary effect of refinancing. Healthways forecasts that following the refinancing earnings per share will drop by about 4 cents in the current year. Consequently, the company is reducing its 2012 earnings per share guidance from an earlier range of 42 cents to 54 cents to a new band of 38 cents and 50 cents.
The Healthways model encourages people to make favorable lifestyle changes that lead to enhanced well-being, reduced healthcare costs, improved performance and economic value. The company has invested in technology platforms that provide scalable support with large populations. It has tie-ups with a large portion of U.S. health plans and counts many millions of people in its customer base.
Due to its unique scalable business model, Healthways shares present a compelling, long-term investment opportunity although it may face many challenges in the short to medium term. Healthways is the leader in a strategically critical and rapidly evolving part of the health care services market. Its fitness program (SilverSneakers) for seniors is available at 14,000 centers across the U.S. and caters to several million eligible enrollees.
Healthways competes with Express Scripts (ESRX - Analyst Report), among others. We are currently Neutral on the stock, supported by a short-term Zacks #3 Rank (Hold).