Community Health Systems' debt is big but manageable, CFO Larry Cash told analysts last week. He also rejected concerns that a new Trump administration would jeopardize any potential sales aimed at alleviating the debt.
CHS faces only nominal debt maturity next year, slightly more than $200 million since two-thirds of about $643 million of a maturing receivables facility has already been pushed back to 2018, Cash told investors at the Bank of America Merrill Lynch 2016 Leveraged Finance Conference.
The debt that needs to be retired gets bigger in 2018. Cash showed in a chart that debt maturity would be about $2.2 billion in 2018.
But Franklin, Tenn.-based CHS is selling assets to reduce an outsized total debt of $15 billion, which is about 6.5 times EBITDA or almost twice that of rival HCA Holdings.
Cash's presentation demontrated that CHS has more than enough cash to meet any near-term debt obligations that might trigger bankruptcy.
Cash said CHS expects to raise about $1.2 billion through the sale of 17 hospitals, most of its home health business and non-hospital real estate by early next year.
He said the company, the nation's second-largest investor-owned hospital chain, planned to use the proceeds to retire debt, including about $700 million of senior secured notes maturing in mid-2018.
In response to an analyst's question about the impact of the recent elections on buyers' appetite for a potentially unstable market, Cash said “strategic buyers” would remain interested.
Those are hospital systems, including not-for-profits, looking to expand statewide or add hospitals that can increase volumes by adding doctors and patient access points, Cash said.
He pointed to an agreement CHS reached with not-for-profit MultiCare Health System to sell CHS's two hospitals and clinics in Spokane, Wash., to Tacoma-based MultiCare.
That deal is expected to net about $425 million for CHS. Those proceeds will be used to retire debt, Cash said. Meantime, Multi-Care gains solidly performing hospitals in eastern Washington to augment its presence around Puget Sound.
Cash assured analysts that CHS has the cash to handle its near-term debt obligations.
The EBITDA that CHS is generating provides a 27% cushion against those obligations, Cash said.
“We're comfortable with that,” he said.