Universal Health sets Thursday launch for $4.15 billion facility

By Sara Rosenberg

New York, June 22 - Universal Health Services Inc. has scheduled a bank meeting for Thursday to launch its proposed $4.15 billion senior secured credit facility, according to sources.

JPMorgan and Deutsche Bank are the joint lead arrangers and bookrunners on the deal.

As outlined in the commitment letter, the facility consists of an $800 million five-year revolver, a $500 million five-year term loan A and a $2.85 billion six-year term loan B.

However, tranching is still moving around a bit, with the possibility that there could be more pro rata and less institutional debt, one source remarked.

The commitment letter outlined initial pricing on the revolver and the term loan A at Libor plus 325 basis points, with the spread being able to range from Libor plus 250 bps to 350 bps based on leverage.

The revolver has an initial commitment fee of 50 bps. This fee can range from 25 bps to 50 bps based on leverage.

In addition, the letter states that pricing on the term loan B is expected to be Libor plus 350 bps with a 1.5% Libor floor.

Amortization on the term loan A is 2.5% for the first eight quarters and 5% each quarter thereafter, with the balance due at maturity, while amortization on the term loan B is 1% with the balance due at maturity.

Financial covenants include a maximum total leverage ratio and a minimum net interest coverage ratio.

Proceeds will be used to help fund the acquisition of Psychiatric Solutions Inc. for $33.75 per share in cash, or about $2 billion.

Including the assumption of $1.1 billion in Psychiatric Solutions net debt, the total transaction consideration is $3.1 billion.

The 2009 combined revenue of the two companies was more than $7 billion and the combined EBITDA was roughly $1.1 billion.

Pro forma total debt to EBITDA is 3.8 times, compared to Universal Health's standalone debt to EBITDA of 1.2 times.

Universal Health does plan to use excess free cash flow to rapidly reduce leverage following completion of the acquisition.

Closing on the transaction is expected to take place in the fourth quarter, subject to customary conditions, including regulatory approvals and clearance under Hart-Scott-Rodino Act, as well as approval by Psychiatric Solutions' shareholders.

Universal Health is a King of Prussia, Pa.-based owner and operator of acute care hospitals and behavioral health care facilities and schools. Psychiatric Solutions is a Franklin, Tenn.-based operator of owned or leased freestanding psychiatric inpatient facilities.

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