HCA Holdings, Inc.
) moved down 1.2% to $51.06 on Mar 4, 2014 after the company
declared that its subsidiary, HCA Inc. would issue a $3 billion
aggregate principal amount of senior secured notes. The terms of
the notes were not disclosed and will be subject to market
conditions at the time of pricing.
The proceeds from the offering will be utilized in parts. HCA
Holdings will use a portion of the proceeds to redeem and
repurchase the outstanding amount under the $1.5 billion senior
secured notes (carrying an interest rate of 8.5%), slated to
mature in 2019.
The remaining proceeds will be utilized to redeem and
repurchase the outstanding amount under the $1.25 billion senior
secured notes (with 7.0875% rate of interest) that are scheduled
to mature in 2020 and to pay related fees and expenses, and for
general corporate purposes.
Last month, HCA Holdings reported fourth-quarter and full-year
2013 results with high interest expenses for the year. Now with
the above issuance, interest expenses are expected to increase
further. Nevertheless, the company's solid operational
performance generates enough funds to service the debt
However, HCA Holdings is already burdened with debt. At the end
of 2013, long-term debt of the company increased 0.3% from that
in 2012. The $3 billion issuance is expected to increase HCA
Holdings' debt further, affecting the balance sheet strength.
Companies frequently resort to debt issuance to raise funds. For
instance, within the healthcare services sector,
Tenet Healthcare Corp.
) issued 6% senior notes worth $4.6 billion in Sep 2013 to fund
the company's acquisition of Vanguard Health Systems Inc. In Mar
2013, healthcare service provider,
Acadia Healthcare Company, Inc.
) raised funds through a $150 million note issuance (carrying an
interest rate of 6.125% and due 2021) to fund acquisitions and to
pay for general corporate purposes.
HCA Holdings currently carries a Zacks Rank #3 (Hold). However,
) is a better-ranked stock in the sector with a Zacks Rank #1
ACADIA HEALTHCR (ACHC): Free Stock Analysis
CHEMED CORP (CHE): Free Stock Analysis Report
HCA HOLDINGS (HCA): Free Stock Analysis
TENET HEALTH (THC): Free Stock Analysis
To read this article on Zacks.com click here.