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Community Health (CYH) Unit Offers Notes $2.8B in Two Tranches

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Community Health Systems, Inc. (CYH - Free Report) recently announced that its wholly-owned unit CHS has priced offerings of $1.9 billion and $0.9 billion worth of senior notes. The notes that are scheduled to mature in 2027 carry an interest rate of 5.625% and the ones with an interest rate of 6% will expire in 2029. Subject to customary closing conditions, the notes offering is likely to be completed on or about Dec 28, 2020.

Notably, the amount of the Notes Offering was enhanced by $1.75 billion aggregate principal amount across both the series of notes, subsequent to the initial announcement of the Notes Offering.

The arm expects to redeem or repurchase its 6.25% senior secured notes due 2023 with the net proceeds of the notes offering and pay down related fees and costs.

Precisely, the issuer CHS expects to use the funds from the Notes Offering to buy the portion of CHS’ pending 2023 Notes, which are validly tendered and accepted for purchase in the cash tender offer announced on Dec 11, 2020 to the extent that the aggregate principal amount of 2023 Notes validly tendered and accepted for purchase in the cash tender offer is less than the entire aggregate principal amount of 2023 Notes outstanding, redeem or repurchase (in one or more open market repurchases and/or privately negotiated transactions) the remaining outstanding principal amount of 2023 Notes.

The company steadily issued senior notes to enhance its financial flexibility without affecting its liquidity position, which only proves its financial prudence. By leveraging the low interest rate environment, triggered by the COVID-19 pandemic, the company is attempting to reduce its interest burden, thereby aiding margin expansion.

Last week, Community Health inked a privately-negotiated deal with a multi-asset investment manager with certain funds and accounts, which hold 6.875% senior unsecured notes due 2028.

Total debt of the company represents 117.9% of its capital, higher than the industry’s average of 93.1%. As of Sep 30, 2020, it has cash and cash equivalents worth $1.8 million and $654 million of additional borrowing capacity under its ABL (Asset-based Lending). The company also expects its divestitures to add to its liquidity. However, it extended its notes, which means that it doesn’t have any near-term maturities.

Zacks Rank and Price Performance

Shares of this currently Zacks Rank #3 (Hold) company have surged 166.8% in a year’s time, outperforming its industry’s growth of 6.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



Other companies in the same space, such as Magellan Health, Inc. , HCA Healthcare Inc. (HCA - Free Report) and Acadia Healthcare Company Inc.  (ACHC - Free Report) have also gained 3.5%, 9.7% and 44.8%, respectively, in the same time frame.

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