Community Health offers $3.13 billion of new notes in exchange

By Susanna Moon

Chicago, May 7 – Community Health Systems, Inc.’s subsidiary CHS/Community Health Systems, Inc. is offering to exchange three series of notes for up to a total $3,125,000,000 principal amount of new notes with extended maturities, as announced on May 1.

The exchange offers will run until 12 a.m. ET on June 1, according to a company update on Monday. The early deadline has been set for 5 p.m. ET on May 17.

For any and all of CHS’ $1,925,000,000 of outstanding 8% senior unsecured notes due 2019, the company will issue up to $1,925,000,000 of new 9 7/8% junior priority secured notes due 2023.

For any and all of its $1.2 billion of outstanding 7 1/8% senior unsecured notes due 2020, the company is offering up to $1.2 billion of new 8 1/8% junior priority secured notes due 2024.

If less than all of the outstanding 2019 and 2020 notes are tendered in the exchange offers, the company will exchange its existing $3 billion of 6 7/8% senior unsecured notes due 2022 – in an amount that would bring the total principal amount of new notes up to $3,125,000,000 – for new 8 1/8% junior-priority secured notes due 2024.

For the 2019 and 2020 notes, the company is offering $1,000 of new notes per $1,000 principal amount of existing notes. For the 2022 notes, the company will issue $750 of new notes per $1,000 principal amount.

The total exchange value includes an early premium $30 of new notes per $1,000 of notes tendered for exchange by the early deadline.

At least 90% of the outstanding 2019 notes must be exchanged for the offers to be completed. There is no minimum tender condition for the other two series.

Additionally, the issuer said it expects to obtain an amendment to its asset-based loan facility to permit the inclusion of the 2022 notes in the exchange offers prior to the commencement of the offers.

Community Health expects that the indenture governing each series of new notes will contain covenants substantially similar to those of its outstanding 6¼% senior secured notes due 2023, provided that each new note indenture will restrict the issuer, or any of its restricted subsidiaries, from incurring additional second-lien debt or debt that is senior in priority to the new notes, but junior in priority to the issuer’s outstanding senior secured credit facilities, ABL facility and existing secured notes.

Further, it is expected that each indenture will provide that the make-whole premium or call premium, as applicable, will be payable upon certain bankruptcy events of default, according to the release.

The issuer and certain institutional investors that are holders of the existing notes have agreed in principal to exchange more than 70% of the 2019 notes, more than 55% of the 2020 notes and more than 55% of the 2022 notes, in the offers, the company said.

Holders who tender 2022 notes will be required to certify that they are also tendering all 2019 notes and 2020 notes they hold in the exchange, the release noted.

Global Bondholder Services Corp. (866 470-3800 or 212 430-3774) is the exchange agent and information agent.

Community Health is a Franklin, Tenn., hospital company.

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