Thursday, February 12, 2009

HCA hopes to raise $300 million to repay debt

NEW YORK — HCA Inc., the U.S. hospital chain purchased in a $33 billion leveraged buyout, is seeking to raise $300 million in a bond offering to repay bank debt and to amend terms of some of its loans.

The sale would be HCA's first since its November 2006 buyout, when the Nashville-based company raised $5.7 billion in what was then the biggest high-yield offering in 17 years, according to data compiled by Bloomberg.

High-yield, high-risk, or junk, borrowers are tapping the new issue market at the fastest pace since June, with yields relative to benchmark rates at the lowest in four months. HCA is turning to bonds to raise cash because it has $12 billion of bank debt maturing in 2012 and 2013, and probably won't be able to refinance in the weakened loan market, said Lauren Coste, an analyst at Fitch Ratings in Chicago.

"It's highly unlikely the loan market will be amenable to refinancing that," Coste said. "This is the first of several steps to proactively manage those maturities."

Debt has been reduced

The hospital chain has cut its debt by $1.4 billion since its buyout in 2006 and has reduced its total debt to earnings to 5.8 times from 6.6 times, Fitch said in a statement Wednesday. HCA is "constrained" by high debt and leverage ratios and an "increasingly challenging industry environment," Fitch said.

"Today, HCA gets to take advantage of a market that is hungry for new deals," Vicki Bryan, a bond analyst at Gimme Credit LLC, said Wednesday in a report. "There has been a steady increase of funds into the high-yield market for several weeks, and portfolio managers are paid to invest cash — not to sit on it."

Ed Fishbough, an HCA spokesman, said that the company was pleased with response to the offering. "This is a step we're taking as part of a prudent and conservative plan to pay down some of our debt that begins maturing in three-and-a-half years," he said. "Recent opportunities in the high yield bond market are allowing us to refinance some of this at a later maturity date."

Fishbough said that HCA has paid down $1.4 billion of its debt since year-end 2006.

But to some analysts, the company hasn't been reducing the debt fast enough.

"HCA has demonstrated a chronic inability to generate sufficient cash to chisel down its massive debt load, and leverage has not improved since 2006," Bryan said Wednesday in the report. "It might get even more expensive to borrow later in the year if HCA continues to deteriorate."

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