Kindred Healthcare set Feb. 2 as the closing date for its merger with Gentiva Health Services after completing an offering of $1.35 billion in senior unsecured debt that will help fund the deal.
The Louisville, Ky.-based post-acute-care provider will offer $750 million in senior notes due 2020 with an interest rate of 8% as well as $650 million in senior notes due 2023 with an interest rate of 8.75%. Both tranches have an issue price of 100%.
The offerings will fund Kindred's $1.8 billion takeover of Gentiva, which includes the assumption of about $1.1 billion in debt. Kindred will pay $19.50 per share for the Atlanta-based home health and hospice operator to become the largest post-acute-care company in the country.
The notes priced higher than expected—driving up the amount of interest Kindred will have to pay—and analysts lowered their estimates for how much financial benefit Kindred is likely to see from the merger in the near-term.
In March, Kindred priced a $500 million debt offering at a more attractive 6.375% interest rate, UBS analyst A.J. Rice wrote in a note to clients. But the company may simply have had bad timing with this latest set of offerings. Falling oil prices have negatively impacted the debt issuances of U.S. oil companies and caused an uneasy ripple effect throughout the high yield debt market, he added.
Kindred's shares have lost most of the gains they picked up in the spring and early summer, and are now trading at about $18.15, near their 52-week low.
Over the past month, the number of shareholders shorting Kindred's stock—or betting it will further decline—increased 105% to account for 16.6% of the company's shares.
Follow Beth Kutscher on Twitter: @MHbkutscher
