Molina Healthcare Inc.
) recently decided to issue 1.125% cash convertible senior
secured notes worth $450 million with maturity scheduled on Jan
In order to manage over allotments, management will also provide
an option to the initial purchasers of the notes to buy an
additional $100 million aggregate principal amount of the notes.
Additionally the company also intends to enter into a privately
negotiated cash convertible note hedge transaction with the
initial buyers of the notes.
The new issuance will require the company to pay interests half
yearly on January 15 and July 15.
The proceeds from the issuance is expected to be $436 million and
will be deployed to finance the cash convertible note hedge
transaction, buy back up to $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 for repurchasing 3.75% Convertible
Senior Notes scheduled to mature in 2014.
The initial conversion rate for the notes will be 24.5277 shares
per $1,000 principal amount.
As of Dec 31, 2012, the debt-to-capital ratio for the company was
0.25x which represented an increase of 3 percentage points from
0.22x at 2011 end. With the issuance of the $450 million debt,
the debt-to-capital ratio is expected to increase significantly
by 23 percentage points to 0.48x.
Molina's interest expense in 2012 increased 8.1% year over year.
The new issuance would require the company to pay an annual
interest of approximately $5.1 million which will further add to
its interest expenses. Nevertheless, the company's solid
operational performance generates enough funds to service the
Last December, another healthcare service provider
) announced that its public offering of 3.15% senior notes worth
$600 million, maturing in December 2022, and 4.625% senior notes
worth $400 million, due December 2042, had been completed. The
3.15% senior notes had been issued at a 0.39% discount, while the
4.625% senior notes had been issued at a 0.063% discount. The
proceeds from the notes were used to fund the acquisition of
Metropolitan Health Networks Inc.
) and to repay Metropolitan's outstanding debt.
Molina carries a Zacks Rank #2 (Buy). Another healthcare
) shares the same Zacks Rank and is worth noting.
COVENTRY HLTHCR (CVH): Free Stock Analysis
HUMANA INC NEW (HUM): Free Stock Analysis
(MDF): ETF Research Reports
MOLINA HLTHCR (MOH): Free Stock Analysis
To read this article on Zacks.com click here.