HealthSpring enters into $350M senior secured credit facility

Feb 12 2010

HealthSpring, Inc. (NYSE:HS) today announced that it has entered into a new $350 million senior secured credit facility. The new agreement consists of $175 million in five-year term loans and a four-year, $175 million revolving credit facility, $25 million of which was drawn at closing. Outstanding loans under the new credit facility bear interest at a spread over a base rate or LIBOR (initially 325 basis points), depending on the Company’s total leverage ratio.

“We believe that we are well positioned to capitalize on potential strategic opportunities created by both the current Medicare Advantage rate environment and healthcare reform. This new facility provides us with greater financial flexibility to, among other things, take advantage of such opportunities.”

Borrowings under the facilities and cash on hand were used to repay approximately $237.0 million of indebtedness outstanding under the Company’s existing credit agreement, which was scheduled to mature on October 1, 2012. In connection with terminating the prior agreement, the Company incurred certain charges including the write-off of approximately $5.0 million of unamortized deferred financing fees and approximately $2.0 million of costs to unwind interest rate swaps. These one-time charges are expected to reduce the previously issued 2010 diluted earnings per share guidance range of $2.25 to $2.50 by approximately $0.07 per share.

Commenting on the new agreement, Karey L. Witty, Executive Vice President and Chief Financial Officer of HealthSpring, said, “We believe that we are well positioned to capitalize on potential strategic opportunities created by both the current Medicare Advantage rate environment and healthcare reform. This new facility provides us with greater financial flexibility to, among other things, take advantage of such opportunities.”