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Stephen Farber, Kindred CFO
Farber

Kindred refinances large chunk of its debt, cuts borrowing costs


By Rachel Landen
Posted: April 11, 2014 - 5:30 pm ET
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Kindred Healthcare, the nation's largest provider of post-acute care, is the latest in a string of healthcare organizations choosing to take advantage of low interest rates to adjust their capital structures and cut their borrowing costs.

The Louisville, Ky.-based network announced Thursday that it has completed refinancing of its existing debt with $2.25 billion of new secured and unsecured debt. Kindred closed its previously announced offering of $500 million in 6.375% notes due in 2022 at an issue price of 100%, with the intent to use the proceeds to redeem $550 million of 8.25% notes maturing in 2019 that were issued when Kindred purchased RehabCare Group in 2011. Kindred also increased its existing senior-secured term-loan facility to $1 billion.

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“The refinancing lowers our borrowing costs, extends our debt maturities, reduces our interest rate risk, improves our covenant flexibility and increases the available capacity under our asset-based loan facility,” Stephen Farber, Kindred's executive vice president and chief financial officer, said in a release.

In recent years, as interest rates have remained at historically low levels, healthcare providers have taken advantage of the low cost of borrowing to refinance debt on their balance sheets. And lenders have been eager to assist. Because healthcare providers' cash flows are often seen as less cyclical and more stable than those in other markets, the industry has been able to gain differentiated access to capital, according to Toby King, managing director in the global healthcare group at Citigroup.

“Over the last couple of years, most of the significant healthcare services companies, like Kindred or a hospital company like LifePoint or HCA, have taken advantage of these markets to lower interest costs, extend duration and obtain more flexible covenant structures,” King said. “It's really become an important part of the strategy for all these companies.”

Earlier this month, Nashville-based chain HCA underwent its own debt refinancing, issuing $1.5 billion in 3.75% notes maturing in 2019 and $2 billion in 5% notes maturing in 2024. HCA will use the proceeds to refinance $1.5 billion in 8.5% debt due in 2019 and $1.25 billion in 7.875% notes due in 2020. The funds, according to analyst expectations, may be used to repurchase shares or assist with acquisitions.

Follow Rachel Landen on Twitter: @MHrlanden


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