Nov 13 2013
HealthSouth Corporation (NYSE: HLS) today announced that the Company entered into separate, privately negotiated exchange agreements under which it will issue $320 million in aggregate principal amount of new 2.0% Convertible Senior Subordinated Notes due 2043 in exchange for 257,110 shares of the Company's outstanding 6.5% Series A Convertible Perpetual Preferred Stock, par value $0.10 per share. The exchange transactions are expected to close on November 18, 2013. Following the transactions, 96,245 shares of the preferred stock will remain outstanding.
"The refinancing transactions we announced today provide significant benefits to the Company and its shareholders," commented Doug Coltharp, Executive Vice President and Chief Financial Officer of HealthSouth. "This transaction is immediately cash flow accretive replacing $16.7 million in cash preferred dividend payments with $6.4 million in cash interest payments, both on an annual, pre-tax basis. In addition, the transaction is not dilutive to the share count. As a result of this transaction, we expect a one-time reduction to net income attributable to HealthSouth common stockholders in the fourth quarter of 2013 of approximately $71 million, or $0.82 per basic share, as the repurchase premium over the book value of the preferred stock being exchanged will be accounted for similar to a preferred dividend payment."
These new convertible notes mature in 2043 and will pay interest of 2.0% per year on the principal amount, payable semiannually in arrears in cash on June 1 and December 1 of each year, beginning June 1, 2014. Commencing with the interest period beginning December 1, 2018, the convertible notes may also pay contingent interest under certain circumstances based on their then current trading price. The convertible notes are convertible, at the option of the holders, at any time on or prior to the close of business on the business day immediately preceding December 1, 2043 into shares of the Company's common stock at a conversion rate of approximately 25.2194 shares per $1,000 in principal amount, which is equal to a conversion price of approximately $39.65 per share, subject to customary anti-dilution adjustments. The Company has the right to redeem the convertible notes before December 1, 2018 if the volume weighted average price of the Company's common stock is at least 120% of the conversion price of the convertible notes for a specified period. On or after December 1, 2018, the Company may, at its option, redeem all or any part of the convertible notes. In either case, the redemption price will be equal to 100% of the principal amount of the convertible notes to be redeemed, plus accrued and unpaid interest.
This press release does not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities law of any such state or jurisdiction. The convertible notes and the common stock issuable upon the conversion of the convertible notes have not been and will not be registered under the Securities Act of 1933, as amended, or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements
Source: HealthSouth Corporation