| NEW YORK
NEW YORK Jan 6 Hospital operator Community
Health Systems Inc is launching a new roughly $4 billion
credit to back its acquisition of rival Health Management
Associates Inc (HMA), sources told Thomson Reuters LPC.
A bank meeting is set for 11 a.m. ET Wednesday in New York
City. Lender commitments are due January 17.
Community Health is planning a $2.26 billion term loan D and
an extended term loan sized at up to 50 percent of the company's
existing term loan C, or roughly $1.7 billion. The new extended
term loan will be fungible with the new term loan D.
The new term loan D will fund the acquisition of HMA, and
the new extended term loan will refinance Community Health's
existing term loan C.
The term loans are expected to mature in seven years.
Credit Suisse and Bank of America Merrill Lynch are joint
physical books. Bookrunners on the transaction include
Citigroup, Goldman Sachs, JP Morgan, RBC, SunTrust, UBS and
Community Health is acquiring HMA for an aggregate purchase
price of $7.5 billion plus a contingent value right of up to
approximately $270 million, according to a Community Health
Community Health's road to acquire HMA has been bumpy and
closely watched, due to activism from HMA's largest shareholder,
private investment management firm Glenview Capital Management.
Glenview initially called the Community Health proposal a
"floor value" for investors. In August 2013, HMA shareholders
ousted HMA's previous board of directors and replaced them with
a slate of nominees from Glenview.
Nonetheless, in November 2013, Glenview confirmed its
intention to vote its shares in favor of the Community Health
proposal. Glenview's backing followed weak third quarter results
The new board of directors also affirmed its support of the
Community Health transaction in November 2013.
The acquisition is subject to approval of HMA stockholders
holding 70 percent of HMA's outstanding shares.
The Community Health/HMA transaction follows hospital
operator Tenet Healthcare Corporation's approximately $4.3
billion acquisition of Vanguard Health Systems as changes in
healthcare are pressuring reimbursements for hospital services,
driving increased need for economies of scale and
diversification in revenue streams at hospitals.
"Everybody's looking to control the increase in the cost of
care," said Moody's Senior Vice President Dean Diaz. "If a
person needs to go to an outpatient surgery center versus in the
hospital, if the hospital owns part of that ambulatory surgery
center, it keeps the revenue within the system."
Community Health and Credit Suisse declined to comment. HMA
did not return calls for comment.