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Community Health bonds price at 99.29 to yield 9%; terms

A $3 billion offering of eight-year senior notes backing Community Health Systems‘ acquisition of Triad Hospitals was completed this afternoon via joint bookrunners Credit Suisse and Wachovia, according to sources. Terms captured the wide end of guidance amid extreme market volatility this week, and size reflects a downsizing by $365 million in favor of more term debt. Also, the deal in its current form reflects a change in structure: it was launched to market as a three-part offering comprising eight-year fixed- and floating-rate tranches and a 10-year fixed-rate tranche. Issuance as a single tranche makes it the third-largest new piece of paper ever sold in the junk bond market, trailing Freeport McMoRan‘s $3.5 billion issue of 8.375% notes and HCA‘s $3.2 billion issue of 9.25% notes.

Proceeds back the purchase of Triad Hospitals at $54 per share, or $6.8 billion, including assumed debt. The transaction will create the largest publicly owned hospital company in the U.S., generating pro forma 2006 revenue of $9.9 billion from 130 hospitals in 28 states. As part of the transaction the companies are tendering for Community Health’s $300 million issue of subordinated 6.5% notes due 2012, Triad’s $600 million issue of senior 7% notes due 2012 and Triad’s $600 million issue of subordinated 7% notes due 2013. Consideration for all three is being made under T+50 make-whole provisions. Terms:

 

Issuer: Community Health Systems Inc
Ratings: B-/B3
Size: $3 billion
Issue: senior notes (144A)
Coupon: 8.875%
Price: 99.294
Yield: 9%
Spread: +395
LIBOR Eq: +334
Maturity: July 15, 2015
Call: nc4
Trade: June 27, 2007
Settle: n/a
Books: CS/WACH
Co’s: n/a
Px Talk: 8.75-9%
Notes: carries T+50 make-whole call during first four years; downsized by $365 million in favor of term loan upsizing