Integrated Health Services said it has secured a $1.75 billion line of credit, leading to speculation that it may be readying to buy the home-care operations of Columbia/HCA Healthcare Corp. or Apria Healthcare Group.
The deal includes a $1 billion revolving credit line and a $750 million term loan, with Citibank and Toronto Dominion Bank heading a group that includes 51 other lenders. The new credit facility replaces a $700 million revolving credit facility with Citibank and 22 other lenders.
Columbia Homecare Group and Apria, two of the nation's largest home-care companies, both went on the block this summer. IHS operates more than 1,000 post-acute locations in 45 states and is also one of the top five largest home-care companies in the U.S.
Nashville-based Columbia initially offered its home-care division, which brought in more than $1 billion in revenues in 1996, to National HealthCare. But it called off the deal when Murfreesboro, Tenn.-based National said it only wanted to buy certain segments of the business near its Southeast holdings.
If Columbia sticks to this all-or-nothing strategy, its pool of potential buyers will narrow dramatically, said Ann Logue, an analyst with Volpe Brown Whelan & Co. in San Francisco.
The uncertainty of when and how an ongoing federal probe into the division's business practices will be resolved has made the operations difficult to value, Logue said. As a result, she said, Columbia likely will have to retain liability for any wrongdoing or sell the division at a lower price.
"IHS is one of the few public companies with an expressed interest in acquiring home-care companies," she said. "Having the credit facility in place makes it a qualified buyer and puts it in the running."
IHS' new line of credit follows a recent statement by New York-based Standard & Poor's Corp. that the outlook for the company's credit is "negative" and "there is the potential that a large debt-financed acquisition could lead to a rating downgrade" (See story, p. 68).
Costa Mesa, Calif.-based Apria, which reported $1.2 billion in revenues last year, is another potential target for Owings Mills, Md.-based IHS. It, too, has faced difficulties. The company announced last week that it expects to report third-quarter earnings below analysts' expectations as a result of its efforts to restructure and sell the company.
Sheree Aronson, director of investor relations for Apria, said 40 potential buyers expressed interest in the company after it announced in June it is considering a sale.
Aronson said Apria then signed confidentiality agreements to provide company information to some 30 interested parties.
Like Columbia, Apria's objective is to sell the company as a whole, not in pieces, Aronson said.
Aronson said Apria anticipates announcing an agreement in late October or early November. She would not comment on whether IHS is one of the interested parties.
Marc Levin, IHS' executive vice president, said the $750 million loan will be used to finance pending acquisitions. Levin said the remaining $1 billion is "not earmarked for any particular acquisition."