CHS adds to debt recycling plans

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Moody’s says company’s capital structure is ‘unsustainable’

authors Geert De Lombaerde

Community Health Systems executives last week said they have added $500 million to a plan that will push out the due dates on chunks of their large debt load.

CHS leaders late last month said they intend to pay off $2.6 billion of unsecured notes with an 6.875 percent interest rate that are scheduled to come due in 2022 with two sets of new notes — one of $700 million of eight-year secured debt paying 8 percent, the other a $1.9 billion batch of unsecured debt paying 6.875 percent in interest and scheduled to come due in 2028.

Franklin-based CHS last week said they have priced the sale of another $500 million of 8 percent notes due in 2026 that will go toward paying off 7.125 percent debt due next year as well as parts of the company’s revolving and asset-based debt.

Equity investors haven’t much liked the sound of these plans, pushing down the company’s shares (Ticker: CYH) by more than 15 percent on Oct. 30 and since then lopping off another roughly 25 percent of their value.

Last week, analysts at debt ratings agency Moody’s Investors Service chimed in, saying CHS’ plan might ease short-term liquidity concerns but “adds more debt to an already unsustainable capital structure.” The analysts said they don’t expect to have to cut their ratings of CHS — they did so last year after a similar debt exchange — but did note they will consider the current plan to be a limited default on the company’s part.



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