Centric Health Closes Sale of Physiotherapy, Rehabilitation and Assessments Operations for Gross Proceeds of Up to CAD$250 Million in Cash
– Company Intends to Use Substantial Portion of Net Proceeds from Divestiture to Repay Debt –
– Significantly Lower Leverage and Future Focus on Specialty Pharmacy and Surgical Centres Will Position Company to Generate Long-Term Sustainable Shareholder Value -
TORONTO, Jan. 4, 2016 /CNW/ - Centric Health Corporation ("Centric Health" or "the Company") (TSX: CHH) today announced it has completed its previously announced sale of substantially all of the businesses within its Physiotherapy, Rehabilitation and Medical Assessments segment1 (the "Sale Transaction") to Audax Private Equity ("Audax") for cash consideration on closing of $245 million, subject to working capital adjustments, plus up to $5 million in contingent consideration. (All figures are in Canadian dollars.)
The Company intends to use a substantial portion of the net proceeds of the Sale Transaction of approximately $232 million to repay debt in accordance with the terms of the various debt instruments currently in place. This will substantially reduce the Company's debt and will improve leverage ratios and simplify and improve the Company's balance sheet. The Company had total debt of $307.9 million as of September 30, 2015.
The impact of the net proceeds, illustratively setting off same against total debt on closing, would improve the Company's total debt to Adjusted EBITDA ratio to 5.2 times from 9.5 times and improve its interest coverage ratio to 2.6 times from 1.2 times. The actual ratios will be dependent upon the eventual debt settlements as well as the impact of the proceeds of the Sale Transaction not used for debt repayment being used for accretive general corporate purposes and other growth initiatives, all of which will meaningfully progress the Company towards its debt to Adjusted EBITDA target of less than four times in the medium term.
As the first step in the deployment of the net proceeds of the Sale Transaction to reduce debt, the Company intends to make an offer to purchase all the outstanding 8.625% Second Lien Senior Secured Notes, of which $190 million principal (plus accrued and unpaid interest) is outstanding, within the next thirty (30) days.
"In 2012 we committed to a plan to reposition the Company for the generation of long-term, sustainable shareholder value with three objectives: Assembling the right senior leadership team, optimizing our operations and improving utilization to drive organic growth, and significantly deleveraging our balance sheet," said David Cutler, President and Chief Executive Officer, Centric Health Corporation. "The close of this transaction marks the successful implementation of that plan and the beginning of the next chapter in the Centric Health story as we pursue the strong growth and margin improvement opportunities in each of our businesses."
"The unprecedented challenge of an aging population, spiralling healthcare costs and growing wait lists will require innovative, cost-efficient solutions that support trusted, quality care and timely access. With established national networks and a community of healthcare experts, a track record of innovation and an overriding commitment to the highest quality care and best patient outcomes, Centric Health is uniquely positioned to complement the public healthcare system to help address this challenge."
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