NationsBank Corp. has won the assignment to lead a $1 billion acquisition and refinancing loan for the noninvestment grade Healthsouth Rehabilitation Corp.
The loan will back the Birmingham, Ala.-based company's acquisition of the rehabilitation hospital division of NovaCare Inc. Most of the loan will refinance an existing facility led by NationsBank.
Healthsouth has made a series of acquisitions in the last year that reflect the consolidation in the health care industry.
The new facility for a noninvestment grade company underscores the desire of banks for higher yielding loans in today's competitive lending market, as well as the hot market for loans to health care companies.
"The banks are very hungry today," said Michael D. Martin, Healthsouth's senior vice president and treasurer. "The flexibility the bank market provides you with when you are in a period of consolidation is very good."
In recent years Healthsouth has made a series of acquisitions, while increasing its reliance on bank loans.
NationsBank became Healthsouth's agent in the middle of 1992 and has increased its facilities each year.
In 1992, NationsBank led a $390 facility for Healthsouth. At the end of 1993, the Charlotte, N.C.-based bank led another loan for $410 million. The two deals ran concurrently.
Healthsouth, however, went to the public placement market seeking $300 million. The company refinanced the remaining debt with a $550 million loan in the middle of 1994.
In an illustration of the appeal the current bank market holds for noninvestment grade companies, Mr. Martin said Healthsouth is not planning to approach the capital markets to reduce the bank debt.
Although pricing has not been set for the current facility, the pricing for the last facility was at the London interbank offered rate plus 125 basis points. Sources close to the deal expect that this new loan may be a medium-term loan and have similar pricing.
One banker outside the deal said that noninvestment grade credits are increasingly popular with banks because their pricing is not as tight as it is for investment grade credits.
NovaCare's hospital rehabilitation unit sought a merger because of the strength of Healthsouth's national presence. "NovaCare didn't have the critical mass to contract out to managed care providers on a national basis," said Kenneth Drucker, a director at Standard & Poor's.
Standard & Poor's has maintained its implied senior debt rating of BB- minus on Healthsouth, with a positive outlook, despite a spate of acquisitions - from a $300 million purchase of hospitals and outpatient centers from National Medical Enterprises Inc. early last year to a $155 million stock swap deal for Surgical Health Corp. in late January.
