Centric Health Extends Revolving Credit Facility, Repays $8.4 Million Alaris Promissory Note and Announces Offer to Extend 5.5% April 2016 Convertible Notes
TORONTO, March 23, 2016 /CNW/ - Centric Health Corporation ("Centric Health" or "the Company") (TSX: CHH) today announced that, following the previously announced purchase and cancellation of $163.4 million of the Company's Second Lien Senior Secured Notes and the redemption of all Preferred Partnership Units1 held by the Alaris Income Growth Fund Partnership ("Alaris") for a redemption price of $38.4 million with a take-back loan made by Alaris to the Company of $8.4 million evidenced by a promissory note, the Company has taken the following additional actions in the context of its strategy to reduce its outstanding debt and strengthen and simplify its balance sheet:
- Extended the Company's revolving credit facility (the "Credit Facility") for a two-year term expiring March 22, 2018, at a reduced interest rate;
- Provided notice to Alaris of its intention to repay in full the $8.4 million promissory note on March 23, 2016;
- Made an offer to holders of the Company's 5.5% convertible notes maturing April 30, 2016 ("5.5% April 2016 Convertible Notes") to extend the maturity date to July 31, 2017. Holders representing more than 50% of the principal outstanding of the 5.5% April 2016 Convertible Notes have indicated their intention to accept the Company's offer to extend; and,
- Advanced its evaluation of options with respect to its 6.0% convertible notes maturing in December 2016 ("6.0% December 2016 Convertible Notes") and its 6.75% convertible notes maturing in October 2017 ("6.75% October 2017 Convertible Notes"). It is the Company's intention at this time to repay the 6.0% December 2016 Convertible Notes in cash.
Since the beginning of 2016, the Company has repaid more than $200 million of debt, reducing its outstanding debt as of December 31, 2015 by more than two-thirds, lowering its total net debt to Adjusted EBITDA ratio to 5.7 times from 9.7 times, and reducing its annual interest expense by $18.5 million (before any adjustments related to the offer to extend the 5.5% April 2016 Convertible Notes).
"These additional actions provide Centric Health with the working capital and further financial flexibility to invest in our significant growth opportunities, both organic and through strategic tuck-in acquisitions, as we pursue our objective of long-term sustainable growth and free cash flow generation," said David Cutler, President and Chief Executive Officer, Centric Health Corporation "With the extension of the revolving credit facility complete, we are now actively evaluating alternatives for the remainder of our convertible debt."
Extension of Revolving Credit Facility
The Company has extended its Credit Facility, which was scheduled to mature on June 9, 2016, pursuant to a second amended and restated credit agreement. The extended Credit Facility will now mature on March 22, 2018. As a result of the significant deleveraging prior to the close of the Credit Facility extension, the interest cost will be lower by approximately 175 bps. The cost of borrowing on the Credit Facility will be set at 3.8% and will be repriced quarterly in accordance with the Company's total debt/EBITDA ratio. The Credit Facility's capacity remains at $35.0 million (including a $3 million swingline facility), an amount that the Company expects is adequate to meet its operating needs, with an additional $15.0 million accordion available subject to lender approval.
Repayment of Alaris Promissory Note
The Company has provided notice to Alaris of its intention to repay the full amount of the $8.4 million promissory note together with accrued and unpaid interest of $47,803 on March 23, 2016. The loan was advanced to Centric Health as part of the redemption by Lifemark of the Preferred Partnership Units of LifeMark held by Alaris for the redemption price of $38.4 million.
Extension of 5.5% April 2016 Convertible Notes
The Company has made an offer to the holders of the $15 million subordinated, unsecured convertible notes of the Company ("Noteholders") which currently mature on April 30, 2016 and bear interest at 5.5% with a conversion price of $0.9229 to elect on or before April 8, 2016 to amend all or any portion of their 5.5% April 2016 Convertible Notes with the following terms: (i) the maturity date would be extended from April 30, 2016 to July 31, 2017, (ii) the interest rate payable thereunder would be increased from 5.5% to 6.5% from and including May 1, 2016 to July 31, 2017 and (iii) the conversion price would be decreased from $0.9229 to $0.52 from and including May 1, 2016 to July 31, 2017 (collectively, the "Amended 2016 Note Terms"). The Noteholders were notified by the Company that if such election was not made in accordance with the terms and conditions set out under the offer, their 5.5% April 2016 Convertible Notes would be repaid at maturity at par for cash by the Company on May 2, 2016. On completion of the offer on April 8, 2016, the holders of the 5.5% April 2016 Convertible Notes who accept the Company's offer will receive an amended subordinated, unsecured convertible note of the Company on the Amended 2016 Note Terms. The offer made by the Company with respect to the Amended 2016 Note Terms has no impact on the warrants originally issued with the 5.5% April 2016 Convertible Notes. A cash consent fee of 1.333% of the Principal Amount that Noteholders choose to extend will be paid on May 2, 2016.
Holders representing more than 50% of the principal outstanding of the 5.5% April 2016 Convertible Notes have indicated their intention to accept the Company's offer to extend.
6.0% December 2016 and 6.75% October 2017 Convertible Notes
Following the repayment of the Alaris Promissory Note, Centric Health will have $26.7 million in proceeds remaining from the sale of its Physiotherapy, Rehabilitation and Medical Assessments operations on December 31, 2015. The Credit Facility and remaining proceeds provide the Company with sufficient funding and flexibility to invest in growing the ongoing businesses and manage its cash requirements through 2016, within the restraints of the amended revolving credit facility's covenants.
The Company is currently evaluating options with respect to its $10.8 million principal outstanding of 6.0% December 2016 Convertible Notes and $27.5 million principal outstanding of 6.75% October 2017 Convertible Notes. It is the Company's intention at this time to repay the 6.0% December 2016 Convertible Notes in cash.
1By Lifemark Health Limited Partnership ("LifeMark"), an affiliate of the Company.
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