Community Health Systems, Inc. Announces Early Tender Results for Its 8.000% Senior Secured Notes Due 2026

Rhea-AI Summary

Community Health Systems, Inc. (NYSE: CYH) announced the early tender results of the cash tender offer to purchase up to $985 million aggregate principal amount of its outstanding 8.000% Senior Secured Notes due 2026. The Company received $1,946,236,000 aggregate principal amount of the outstanding 2026 Notes, exceeding the Tender Cap, resulting in a prorated acceptance. The settlement date for the accepted notes is expected to occur on December 28, 2023.

Financial Analyst

The tender offer by Community Health Systems to purchase a portion of its outstanding 8.000% Senior Secured Notes due 2026 is a significant financial maneuver with implications for both the company's capital structure and its investors. By repurchasing these notes, the company is effectively reducing its future interest obligations, which could improve its net interest margin and potentially its creditworthiness. The high level of participation in the tender offer, with nearly the entire issue tendered, suggests that investors were eager to take advantage of the opportunity, possibly due to the attractive terms or a desire to reduce exposure to the company's debt.

From a financial perspective, this could indicate that the company is actively managing its debt profile in a way that is favorable to both the company and its bondholders. It is also worth noting that the proration factor of 50.6% means that only about half of the tendered notes will be accepted for purchase, which could lead to some dissatisfaction among investors who were looking to liquidate a larger portion of their holdings. Investors should closely monitor the company's leverage ratios and interest coverage metrics following the completion of the tender offer for indications of the company's financial health and strategic direction.

Debt Market Analyst

The early tender results show a significant oversubscription, with the tendered amount nearly doubling the $985 million cap set by Community Health Systems. This level of oversubscription is indicative of a robust demand for liquidity among note holders or a favorable view of the tender offer's terms. The proration factor being over 50% is also noteworthy, as it may reflect the company's strategic decision to limit the repurchase to maintain a balanced approach between reducing debt and preserving cash.

Investors should consider the implications of the tender offer's results on the secondary market for the remaining 2026 Notes. With a substantial reduction in the outstanding principal amount, the liquidity and market dynamics for the notes could change, potentially affecting their trading value. Additionally, the company's actions could signal its intent to further manage its debt maturities or interest expense, which could lead to future corporate actions that debt investors should be aware of.

Credit Analyst

By analyzing the early tender results, we can infer that Community Health Systems is taking a proactive stance in managing its debt obligations, which could lead to a reassessment of the company's credit risk profile. The repurchase of the 8.000% Senior Secured Notes at a 1:1 ratio of principal to tender offer price, plus accrued interest, suggests that the company is capitalizing on favorable market conditions to reduce higher-cost debt.

The potential reduction in interest expenses, assuming the tender offer is completed as planned, could have a positive impact on the company's interest coverage ratio, a critical metric in credit analysis. However, the large scale of tendered notes also implies that the market may have been seeking an exit or rebalance from this particular security, which could be due to concerns about the company's long-term financial outlook or the healthcare sector in general. Monitoring subsequent financial disclosures and market reactions will be essential to assess the long-term credit implications of this tender offer.

FRANKLIN, Tenn.--(BUSINESS WIRE)-- Community Health Systems, Inc. (the “Company”) (NYSE: CYH) announced today the early tender results of the previously announced cash tender offer (the “Tender Offer”) by its wholly owned subsidiary, CHS/Community Health Systems, Inc. (the “Issuer”), to purchase up to $985 million aggregate principal amount (the “Tender Cap”) of the Issuer’s outstanding 8.000% Senior Secured Notes due 2026 (the “2026 Notes”), on the terms and subject to the conditions set forth in the Offer to Purchase Statement, dated December 11, 2023, as amended (the “Offer to Purchase”).

According to Global Bondholder Services Corporation, the depositary and information agent for the Tender Offer, as of 5:00 p.m., New York City time, on December 22, 2023 (the “Early Tender Deadline”), $1,946,236,000 aggregate principal amount of the outstanding 2026 Notes were validly tendered and not validly withdrawn. As the aggregate principal amount of the 2026 Notes validly tendered and not validly withdrawn at or prior to the Early Tender Deadline exceeded the Tender Cap, the Company will accept such 2026 Notes for purchase on a prorated basis.

The table below identifies the aggregate principal amount of 2026 Notes validly tendered (and not validly withdrawn) as of the Early Tender Deadline, the aggregate principal amount of 2026 Notes that will remain outstanding on the Early Payment Date (as defined below) and the approximate proration factor.

CUSIP No.(1)

Title of Security

Aggregate Principal Amount Outstanding(2)

Aggregate Principal Amount Tendered as of the Early Tender Deadline

Aggregate Principal Amount to be Accepted for Purchase

Aggregate Principal Amount Remaining Outstanding

Approximate Proration Factor

12543D BC3 U17127 AL2

8.000% Senior Secured Notes due 2026

$2,100,809,000

$1,946,236,000

$985,000,000

$1,115,809,000

50.6%

(1) CUSIPs are provided for the convenience of holders. No representation is made as to the correctness or accuracy of such numbers. (2) Aggregate principal amount outstanding for the 2026 Notes as of December 11, 2023.

The withdrawal deadline for the Tender Offer was 5:00 p.m., New York City time, on December 22, 2023, and has not been extended. Accordingly, previously tendered 2026 Notes may not be withdrawn, subject to applicable law.

The settlement date for 2026 Notes validly tendered as of the Early Tender Deadline and accepted for purchase is expected to occur on December 28, 2023 (the “Early Payment Date”). On the Early Payment Date, the Company will pay the total consideration of $1,000 per $1,000 principal amount of 2026 Notes accepted for purchase plus accrued and unpaid interest from and including the interest payment date immediately preceding the Early Payment Date to, but not including, the Early Payment Date.

The Issuer will accept for purchase the 2026 Notes validly tendered and not validly withdrawn as of the Early Tender Deadline on a prorated basis, in accordance with the Offer to Purchase. 2026 Notes not accepted for purchase as a result of proration will be rejected from the Tender Offer and will be returned to tendering holders at the Issuer’s expense promptly following the earlier of the Expiration Time (as defined below) or the date on which the Tender Offer is terminated, in accordance with the Offer to Purchase.

The Tender Offer is scheduled to expire at 5:00 p.m., New York City time, on January 10, 2024 (the “Expiration Time”), unless extended or earlier terminated by the Issuer. However, because the aggregate principal amount of the 2026 Notes validly tendered and not validly withdrawn as of the Early Tender Deadline exceeds the Tender Cap, the Issuer does not expect to accept for purchase any 2026 Notes tendered after the Early Tender Deadline.

The Tender Offer is subject to the satisfaction or waiver of certain conditions as described in the Offer to Purchase. The complete terms and conditions of the Tender Offer are set forth in the Offer to Purchase and remain unchanged.

The Issuer has retained Citigroup Global Markets Inc. to act as dealer manager in connection with the Tender Offer. Questions about the Tender Offer may be directed to Citigroup Global Markets Inc. at (800) 558-3745 (toll free) or (212) 723-6106 (collect). Copies of the Tender Offer documents and other related documents may be obtained from Global Bondholder Services Corporation, the depositary and information agent for the Tender Offer, at (855) 654-2015 (toll free) or (212) 430-3774 (collect), or by email at contact@gbsc-usa.com.

This press release shall not constitute an offer to buy or sell, or the solicitation of any offer to buy or sell, any securities. Any offer or solicitation with respect to the Tender Offer will be made only by means of the Offer to Purchase, and the information in this press release is qualified by reference to the Offer to Purchase. The Tender Offer is not being made to holders of 2026 Notes in any jurisdiction in which the making or acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. In addition, nothing contained herein constitutes a notice of redemption of the 2026 Notes. Holders must make their own decision as to whether to tender any of their 2026 Notes, and, if so, the principal amount of 2026 Notes to tender.

Forward-Looking Statements

This press release may include information that could constitute forward-looking statements. These statements involve risk and uncertainties. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231226414126/en/

Investor Contacts:

Kevin J. Hammons, 615-465-7000

President and Chief Financial Officer

or

Anton Hie, 615-465-7012

Vice President – Investor Relations

Media Contact:

Tomi Galin, 615-628-6607

Executive Vice President, Corporate Communications, Marketing and Public Affairs

Source: Community Health Systems, Inc.

FAQ

What is the latest announcement from Community Health Systems, Inc. (NYSE: CYH)?

The company announced the early tender results of the cash tender offer to purchase up to $985 million aggregate principal amount of its outstanding 8.000% Senior Secured Notes due 2026.

What is the total amount of outstanding 2026 Notes tendered?

The total amount of outstanding 2026 Notes tendered is $1,946,236,000, exceeding the Tender Cap.

When is the settlement date for the accepted notes?

The settlement date for the accepted notes is expected to occur on December 28, 2023.

What is the approximate proration factor for the tendered notes?

The approximate proration factor is 50.6%.

Who is the dealer manager for the Tender Offer?

Citigroup Global Markets Inc. has been retained to act as the dealer manager in connection with the Tender Offer.