STOCK TITAN

Surgery Partners, Inc. Announces Pricing of New Senior Notes Offering

Rhea-AI Impact
(Neutral)
Rhea-AI Sentiment
(Neutral)
Tags
Rhea-AI Summary
Surgery Partners, Inc. (NASDAQ: SGRY) announced a private offering of $800 million in senior unsecured notes due 2032 by its subsidiary, Surgery Center Holdings, Inc. The proceeds will be used to redeem existing notes, pay related fees, and fund future acquisitions.
Positive
  • None.
Negative
  • None.

Insights

The decision by Surgery Partners, Inc. to issue $800 million in senior unsecured notes at a 7.250% interest rate reflects a strategic move to restructure its debt profile. By redeeming higher-interest notes due in 2025 and 2027, the company is effectively lowering its cost of capital. This is a common financial strategy where a company takes advantage of market conditions to refinance part of its debt at a lower interest rate, thereby reducing interest expenses over time.

Investors should note the senior unsecured nature of the notes, which means they rank above other unsecured debt in case of liquidation but do not have collateral backing them. While this might imply a higher risk compared to secured notes, the interest rate offered seems to compensate for the risk premium. The guarantee by domestic wholly-owned subsidiaries also adds a layer of security for the note holders.

The use of excess proceeds for general corporate purposes, including future acquisitions, indicates an aggressive growth strategy. This could signal to investors that the company is looking to expand its market presence, which may have positive long-term implications if managed effectively. However, it also entails additional risks as acquisitions can lead to integration challenges and potential dilution of shareholder value if not executed properly.

From a market perspective, the issuance of these notes by Surgery Partners can be seen as a response to the current interest rate environment and the company's outlook on future rates. If the company anticipates that interest rates will rise, locking in a rate now could be beneficial. However, if rates were to decrease, the company might have to carry a higher interest rate than necessary.

Moreover, the healthcare sector, particularly the outpatient surgical space, is experiencing consolidation, with companies seeking to expand their service offerings and geographical reach. Surgery Partners' intent to use proceeds for acquisitions aligns with this trend. This could make the company more competitive and possibly increase its market share, which is an important consideration for stakeholders.

It's also worth noting that the private nature of the offering, targeting 'qualified institutional buyers,' suggests that the company is looking for sophisticated investors who understand the risks and are capable of making large investments. This might imply a level of confidence in the company's financial health and growth prospects.

When assessing the impact of Surgery Partners' note issuance, one must consider the terms of the debt and the company's leverage. A 7.250% coupon rate for a non-investment grade issuer is relatively high in today's market, reflecting the inherent credit risk. However, it's lower than the rates of the notes being redeemed, which suggests an improvement in the company's creditworthiness or a strategic play to capitalize on current investor demand for higher yields amidst a low-interest-rate environment.

The redemption of existing notes before maturity can also be a positive signal to the market, indicating proactive financial management. However, investors should be cautious of the potential for increased leverage if the company does not manage the new capital effectively or if the anticipated acquisitions do not yield the expected returns.

It is also important to analyze the terms and covenants associated with the new issuance, as they can have significant implications for both the issuer and the investors. For example, more restrictive covenants can limit the company's operational flexibility, while lenient terms might suggest confidence from investors in the company's financial stability and growth trajectory.

BRENTWOOD, Tenn., March 26, 2024 (GLOBE NEWSWIRE) --

Surgery Partners, Inc. (NASDAQ:SGRY)  (“Surgery Partners” or the “Company”) today announced that its wholly-owned subsidiary, Surgery Center Holdings, Inc. (the “Issuer”), priced $800,000,000 aggregate principal amount of its 7.250% senior unsecured notes due 2032 (the “Notes”) in a previously announced private offering exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The offering is expected to close on April 10, 2024, subject to certain customary closing conditions. The Notes will be guaranteed (the “Guarantees”) on a senior unsecured basis by each domestic wholly-owned subsidiary of the Issuer that guarantees its obligations under its senior secured credit facilities.

Surgery Partners intends to use the net proceeds from this offering to redeem all of the Issuer’s outstanding 6.750% senior unsecured notes due July 1, 2025 and 10.000% senior unsecured notes due April 15, 2027, to pay the accrued interest on such notes and to pay related fees and expenses in connection with this offering and such redemptions. The excess proceeds from this offering will be used for general corporate purposes, including to fund future acquisitions.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy securities, nor shall there be any offer, solicitation or sale in any jurisdiction in which, or to any person to whom, such offer, solicitation or sale would be unlawful. The Notes and the Guarantees are being offered and sold only to persons reasonably believed to be “qualified institutional buyers” in the United States pursuant to Rule 144A under the Securities Act, and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act. The Notes and the Guarantees have not been, and will not be, registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state laws.

About Surgery Partners

Headquartered in Brentwood, Tennessee, Surgery Partners is a leading healthcare services company with a differentiated outpatient delivery model focused on providing high quality, cost effective solutions for surgical and related ancillary care in support of both patients and physicians. Founded in 2004, Surgery Partners is one of the largest and fastest growing surgical services businesses in the country, with more than 180 locations in 33 states, including ambulatory surgery centers, surgical hospitals, multi-specialty physician practices and urgent care facilities.

Forward-Looking Statements

This press release contains forward-looking statements, including those regarding Surgery Partners’ intention to offer and sell, and apply the net proceeds of, the Notes. These statements include, but are not limited to, the Company’s expectations regarding the proposed offering. These statements can be identified by the use of words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “continues,” “estimates,” “predicts,” “projects,” “forecasts,” and similar expressions. All forward-looking statements are based on current expectations and beliefs as of the date of this release and are subject to risks, uncertainties and other factors that may cause actual results to differ materially from the expectations discussed in, or implied by, the forward-looking statements. Many of these factors are beyond our ability to control or predict including, without limitation, the risks and uncertainties identified and discussed in the Company’s reports filed with the SEC, including in Item 1A under the heading "Risk Factors" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Except as required by law, neither the Company nor the Issuer undertakes any obligation to revise or update publicly any forward-looking statements to reflect events or circumstances after the date of this report, or to reflect the occurrence of unanticipated events or circumstances.

Contact:
Surgery Partners Investor Relations
(615) 234-8940
IR@surgerypartners.com


FAQ

What is the purpose of Surgery Partners' private offering of senior unsecured notes?

The purpose is to redeem existing notes, pay related fees, and fund future acquisitions.

When is the offering expected to close?

The offering is expected to close on April 10, 2024, subject to certain customary closing conditions.

How will Surgery Partners use the net proceeds from the offering?

The net proceeds will be used to redeem outstanding notes, pay accrued interest, related fees, and expenses, and fund future acquisitions.

Are the Notes and Guarantees being offered to the public?

No, the Notes and Guarantees are being offered and sold only to qualified institutional buyers in the US and non-US persons outside the US.

Are the Notes and Guarantees registered under the Securities Act?

No, they have not been registered under the Securities Act or state securities laws and may not be offered or sold in the US without registration or an applicable exemption.

Surgery Partners, Inc.

NASDAQ:SGRY

SGRY Rankings

SGRY Latest News

SGRY Stock Data

3.81B
127.12M
1.08%
112.93%
8.61%
Medical Care Facilities
Services-general Medical & Surgical Hospitals, Nec
Link
United States of America
BRENTWOOD