Gentiva Health Services, Inc. (GTIV) announced the completion of a refinancing of $727 million of indebtedness outstanding under its senior secured credit agreement.
Accordingly, Gentiva has reduced its LIBOR floor for Eurodollar rate loans for both the Term Loan A and the Term Loan B facilities from 1.75% to 1.25%. In addition, the interest rate margin applicable plummeted from 5.00% to 3.25% on the Term Loan A facility and from 5.00% to 3.50% on the Term Loan B facility.
Additionally, Gentiva’s interest rate at current LIBOR rates was reduced from 6.75% to 4.50% on the Term Loan A facility and from 6.75% to 4.75% on the Term Loan B facility for Eurodollar rate loans. Gentiva also paid a 2% prepayment penalty on the Term Loan B facility.
Gentiva reduced the minimum interest coverage ratio to 2.25-1.00 for each quarter starting with the quarter ending on March 31, 2011 and continuing through the maturity of the loans. Gentiva’s interest coverage ratio previously was 2.75-1.00 for each quarter through December 31, 2012, and 3.00-1.00 for each quarter thereafter.
Amortization and maturity terms of the loans did not change. Both Term Loan A and the revolving facility will mature five years after August 17, and Term Loan B matures after six years.
Further, Term Loan A is subject to annual amortization equal to 12.5% of the aggregate principal amount of the initial Term Loan A advances, which is payable in equal quarterly installments. The balance of Term Loan A will be due and payable at maturity.
Term Loan B is subject to annual amortization equal to 2.5% of the aggregate principal amount of the initial Term Loan B advances, which is payable in equal quarterly installments. The balance of Term Loan B will be due and payable at maturity.
In May 2010, Gentiva planned to acquire Odyssey HealthCare Inc. for about $1 billion, and expected to raise about $1.1 billion in new debt financing to fund the purchase price and to refinance existing debt.
Bank of America Merrill Lynch, a wing of Bank of America Corporation (BAC), General Electric Capital Corporation, an arm of General Electric Company (GE), Barclays Capital, a unit of Barclays Plc (BCS) and SunTrust Robinson Humphrey, a unit of SunTrust Banks, Inc. (STI) acted as joint lead arrangers for the Gentiva’s refinancing.
Originally, Gentiva planned to issue $1.1 billion of debt comprising of a Term A and Term B senior secured bank loans of a $200 million and $600 million, respectively, with a $125 million revolving credit facility, and to issue $305 million of senior unsecured notes, to use the proceeds to primarily finance the acquisition.
Accordingly, the pricing of the term loans was kept at 450 to 475 basis points over the LIBOR, with a 1.75% minimum LIBOR rate.
However, later in August 17, with the completion of the Odyssey acquisition, Gentiva revised the agreement with a $200 million of term loan A facility, a $550 million of term loan B facility and a $125 million of revolving credit facility.
In addition, Gentiva completed its previously announced offering of $325 million aggregate principal amount of 11.5% Senior Notes due 2018, which represents an increase of $20 million in principal amount over the previously announced proposed offering of $305 million.
Finally, Gentiva used the net proceeds from the sale of the notes, together with available cash and approximately $780 million in proceeds from a new secured credit facility, to fund the acquisition.
The acquisition of Odyssey has made Gentiva a leading hospice care provider in the U.S. Gentiva now projects a collective average daily patient census of approximately 14,000 by expanding its operations in about 30 states. Gentiva expects to bring its innovative specialty home health programs and other services to patients by broadening its scope of operations.
Currently, Gentiva carries a Zacks #3 Rank, which translates into a short-term Hold recommendation.
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