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Centene (CNC) Offers Senior Notes Priced at $1.8 Billion

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Centene Corporation (CNC - Free Report) recently announced the pricing of its senior notes, carrying an interest rate of 2.450%. Subject to certain closing conditions, the public offering of $1.8 billion notes will mature on or before Jul 1, 2021.

Net proceeds from the issuance of these notes will be used for the payment of the company’s previously announced buyout of Magellan Health Inc. (MGLN - Free Report) . The remainder of the amount will be used in paying the related fees and expenses. However, the closing of the offering is not conditioned to the completion of the Magellan Health purchase.

In that case, the health insurance provider expects to utilize the amount on debt repayment and general corporate purposes. The move is expected to aid margin expansion by capitalizing on the low interest rate environment.
Centene is a highly leveraged company and regularly refinances debt through tender and exchange offers.

Last September, it announced the pricing of $2.2 billion aggregate principal amount of senior unsecured notes. The notes carry an interest rate of 3% p.a. and are scheduled to mature on 2030.

Long-term debt at the company has been rising since 2005, mainly because its acquisitions are financed majorly by borrowings. Its total debt reflects 38.8% of its capital, higher than the industry's average of 36.4%. Also, its times interest earned stands at 6X, much lower than the industry’s average of 12.7X. As of Mar 31, 2021, the company has cash and cash equivalents of $9.6 billion, lower than its long-term debt of $16.7 billion. The borrowings include $152 million under its revolving credit facility.

Year to date, the company has rallied 21.3%, outperforming its industry’s growth of 14.4%.

Zacks Investment ResearchImage Source: Zacks Investment Research

The stock carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Some better-ranked stocks from the same space are The Joint Corp. (JYNT - Free Report) and Select Medical Holdings Corporation (SEM - Free Report) , each holding a Zacks Rank #2 (Buy) at present.

Earnings of The Joint Corp. and Select Medical managed to deliver a trailing four-quarter surprise of 199.2% and 245.9%, respectively.

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