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Community Health cuts revolver to $840 million total, edits covenants
By Wendy Van Sickle
Columbus, Ohio, Feb. 27 – Community Health Systems, Inc. and its wholly-owned subsidiary CHS/Community Health Systems, Inc. entered into a third amendment on Monday to its credit agreement dated July 25, 2007 with Credit Suisse AG as administrative agent to reduce the revolving commitments and make some changes to its covenants, according to an 8-K filing with the Securities and Exchange Commission.
Specifically, the extended revolving commitments were reduced to $650 million for a revolving total of $840 million combined with the non-extended portion.
In May of 2017, $739 million of revolving commitments had been extended to Jan. 27, 2021 from Jan. 27, 2019.
The credit agreement was also amended to:
• Remove the EBITDA to interest expense ratio financial covenant; and
• Replace the senior secured net debt to EBITDA ratio financial covenant with a first-lien net debt to EBITDA ratio financial covenant.
The new financial covenant provides for a maximum first-lien net debt to EBITDA ratio of 5.25 to 1.0, stepping down to 5.0 to 1.0 on July 1, 2018, 4.75 to 1.0 on Jan. 1, 2019, 4.5 to 1.0 on Jan. 1, 2020 and 4.25 to 1.0 on July 1, 2020.
In addition, Community Health agreed to modify its ability to retain asset sale proceeds and instead to apply them to prepayments of term loans based on pro forma first-lien leverage.
To the extent the ratio of first-lien net debt to EBITDA is greater than or equal to 4.5 to 1.0, 100% of net cash proceeds of asset sales will be applied to prepay term loans; to the extent the first-lien leverage ratio is less than 4.5 to 1.0 but greater than or equal to 4.0 to 1.0, 50% of such proceeds will be applied to prepay term loans; and to the extent the first-lien leverage ratio is less than 4.0 to 1.0, there will be no requirement to prepay term loans with such proceeds.
Community Health is a Franklin, Tenn., hospital company.
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