Universal Health Services has revised the scale of its private sale of convertible bonds.
Because the number of financial institutions and the amount they were willing to invest exceeded the company's expectations, UHS is selling $225 million of 20-year discounted convertible bonds, up from the $170 million it had announced earlier (June 19, p. 16).
Merrill Lynch & Co., J.P. Morgan, UBS Warburg and Bank of America Securities were the underwriters of the offering.
"We were met with very strong demand, which I think speaks well for the entire hospital industry," said Kirk Gorman, UHS' chief financial officer. The King of Prussia, Pa.-based company plans to use about $150 million of the proceeds to finance previously announced acquisitions and the remainder to pay down bank debt, Gorman said.
Those acquisitions include a $105 million purchase of 11 behavioral health hospitals and another closed facility from Charter Behavioral Health Systems, which is currently in bankruptcy proceedings. UHS is also planning to spend $45 million to buy St. Mary's Mercy Hospital, a 137-bed Roman Catholic acute-care hospital in Enid, Okla. (May 1, p. 16).
The bonds also carry a $25 million overallotment option, which means the company may sell $25 million more within the next month.
The bonds are convertible to the company's stock at $76.02 per share, a 22% premium over the stock's closing price June 19 of $62.31. The face value of the bonds is about $525 million, and if the company exercises the overallotment option the value will be about $590 million.
Also entering the debt market last week was Ramsay Youth Services, which said it has issued $5 million in subordinated debt that will be used to expand its business. The Coral Gables, Fla.-based company, which runs mental health and other programs for troubled youth, last month received initial court approval on an agreement to purchase from Charter and its landlord Crescent Real Estate Equities a 60-bed Bradenton, Fla., facility specializing in the treatment of such youth. The sale is expected to close after June 27.