Centric Health Further Reduces Debt By $30 Million Through Redemption of All Remaining Alaris Preferred Partnership Units and Take-Back Loan of $8.4 Million Loan from Alaris
TORONTO, March 7, 2016 /CNW/ - Centric Health Corporation ("Centric Health" or "the Company") (TSX: CHH) today announced a further $30 million reduction of its outstanding debt through the redemption (without penalty) by LifeMark Health Limited Partnership, an affiliate controlled by Centric Health, of all its Preferred Partnership Units (the "Units") issued and outstanding to Alaris Income Growth Fund Partnership ("Alaris") for the full redemption price of approximately $38.4 million. Prior to redemption, the Units had an implied interest rate of 11.2% with the principal and interest rate increasing 4% annually. Immediately upon redemption of the Units, Alaris loaned Centric Health approximately $8.4 million in consideration of a promissory note (the "Alaris Promissory Note") on substantially the same economic terms as applied to the equivalent value of Units.
The repurchase of the Units, as well as the recently completed purchase of a principal amount of $164.3 million of Second Lien Senior Secured Notes (the "Notes"), both of which were funded from the proceeds of the sale of the Company's Rehabilitation, Physiotherapy and Medical Assessments businesses completed on December 31, 2015 (the "Sale Transaction"), have reduced Centric Health's outstanding debt by an aggregate of $194.3 million, representing 83% of the net proceeds from the Sale Transaction. The Company's outstanding debt as at March 4, 2016 is $120.5 million and net debt as at March 4, 2016 is $82.9 million. The repurchase of the Units will generate incremental interest expense savings of approximately $3.3 million annually, bringing total annual interest savings of $17.5 million taking into account the repurchase of the Notes. The debt reduction has reduced the Company's total net debt to adjusted EBITDA ratio to 5.7 times from 9.7 times and improved its interest coverage ratio to 2.3 times from 1.2 times.
"The deployment of more than $194 million towards debt reduction since the beginning of the year is a truly transformational event for our Company," said David Cutler, President and Chief Executive Officer, Centric Health Corporation. "Combined, the Unit redemption and Note purchase have dramatically improved our leverage ratio and reduced our annual interest expense, while simplifying our balance sheet considerably."
"Looking ahead, we have the balance sheet strength and financial flexibility going forward to meaningfully invest in the growth of our businesses through both organic opportunities and prudently acting on accretive acquisition opportunities that will drive near-term EBITDA and cash flows, while continuing to pare down debt, with a target of less than 4.0 times debt to EBITDA in the medium term."
Following the redemption of the Units, Centric Health has $34.9 million in proceeds remaining from the Sale Transaction.
The Alaris Promissory Note has a fifteen year term to maturity and the Company has the ability to repay the outstanding balance at any time with one day's notice. The other terms and conditions of the Alaris Promissory Note are substantially the same as those that were in place for the Units.
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