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Analysis

CHS Launches $1B Debt Tender Offer, Estimates Operating Revenues Slid in Q4

By Jack O'Brien  
   January 23, 2020

The Franklin, Tennessee–based for-profit hospital operator's tender offer will expire on February 20.

Community Health Systems, Inc. (CHS) announced the launch of a $1 billion debt tender offer Thursday morning, according to a filing with the Securities and Exchange Commission.

CHS plans to use the net proceeds of the tender offer to purchase "any and all" of its 5.125% Senior Secured Notes due in 2021, redeem all 2021 notes not purchased pursuant to the tender offer, and cover any related fees and expenses.

The Franklin, Tennessee–based for-profit hospital operator's tender offer will expire at midnight on February 20.

CHS' stock reacted negatively to the announcement, trading down more than 3% in the early morning session. 

Related: 'This is Not Just a Blip.' Community Health Systems CEO Touts Best Numbers Since 2015

As part of the tender offer, CHS also released estimates of its year-end financials.

For Q4 2019, CHS estimates that its net operating revenues were $3.2 billion, down 4.8% year-over-year. Similarly, the system estimates that its full-year net operating revenues were $13.2 billion, down 6.7%.

CHS estimates that admissions fell nearly 10% in Q4 and just over 11% for the year. Adjusted admissions fell 8.6% in Q4 and 10.6% in 2019, CHS estimates.

Ratings agencies opined on CHS' debt tender offer shortly after it was publicly announced.

S&P Global Ratings said the action was "incrementally positive" since CHS plans to use the proceeds from the offer to refinance its 2021 notes and a portion of its 2023 maturities.

Fitch Ratings gave CHS' secured notes a B/RR1 rating, though said the company's credit profile "remains stressed." Meanwhile, Moody's Investors Service assigned CHS' senior notes a Caa2 rating and said the company's outlook is stable.

The debt tender offer comes three weeks into Kevin Hammons' tenure as chief financial officer (CFO) at CHS. 

Hammons replaced Thomas J. Aaron, who served as CFO from May 2017 until his retirement at the end of 2019.

Editor's note: This story has been updated to include commentary from S&P Global Ratings, Moody's Investors Service, and Fitch Ratings.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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