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Select Medical Holdings Corporation (SEM - Snapshot Report) recently issued $600 million 6.375% senior notes with maturity scheduled in 2021. Select Medical is expected to close the transaction on May 28, 2013, subject to customary closing conditions.
    
The proceeds from the issuance will be deployed to partly repay the amounts outstanding on the $850 million term loan, the $275 million term loan under its senior secured credit facilities, as well as to pay the related fees and expenses.   

As of Mar 31, 2013, the debt-to-capital ratio for Select Medical was approximately 0.66x which was in line with the debt-to-capital ratio at 2012 end. The company is likely to repay a portion of its existing debts with this new issue so we could not conclusively say, what will be the new ratio post the issue.
    
The new issuance would require Select Medical to pay an annual interest of $38.25 million. Nevertheless, the company’s solid operational performance generates enough funds to service the debt uninterruptedly. Its interest expense in the first quarter of 2013 reduced 1.9% year over year to $23.5 million which is expected to increase with the issuance of the debt.

Last February, another industry major, Molina Healthcare Inc. (MOH - Analyst Report) decided to issue 1.125% cash convertible senior secured notes worth $450 million with maturity scheduled on Jan 15, 2020. The proceeds from the issuance was deployed to finance the cash convertible note hedge transaction, buy back $50 million of its common stock and to repay the outstanding debt of $40 million. The remaining proceeds will be utilized for working capital needs and general corporate purposes as well as to repurchase 3.75% Convertible Senior Notes scheduled to mature in 2014.

Select Medical carries a Zacks Rank #4 (Sell). Among others from the industry, Aetna Inc. (AET - Analyst Report) and Humana Inc. (HUM - Analyst Report) carry Zacks Rank #2 (Buy) and are worth noting. Molina carries a favorable Zacks Rank #1 (Strong Buy).

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