Wednesday, November 26, 2014

Kindred Borrows Big for Gentiva


Kindred Healthcare raised nearly $250 million for its acquisition strategy.  It issued roughly $100 million in stock and $150 million in tangible equity units.  Also, the company amended its term loan facility to pay a higher interest rate in return for relaxed debt covenants.  For a 0.25% interest rate increase Kindred's leverage can now be as high as 6 to 1.  That's 85% debt to 15% equity for the next six quarters.

The Company intends to use the net proceeds of these offerings, combined with proceeds from additional financing transactions, to fund the previously announced acquisition of Gentiva.  
Debt financing will be $1.7 to 1.9 billion according to corporate documents.  Gentiva's senior executives will garner huge sums via golden parachute compensation, change of control agreements, severance agreements, ordinary course bonuses, transaction bonuses of $10 million, in the money options, restricted stock, deferred stock units and performance cash awards.  It looks like Gentiva executive engorgement could easily eat up $50 million.   That'll be the topic of my next letter.

Anonymous (from Gentiva)


  1. Anonymous,

    It's difficult to stomach executive greed.given hospice's roots. Volunteer clinicians dedicated their skills and time to the belief that life, joy, warmth and richness can result when one person reaches out to another to soften the impact of disease and loss.

    Gentiva and Kindred executives perform the opposite, providing toxic management that repeatedly takes from people trying to live hospice's original mission. Gentiva's staff suffer management dis-ease while trying to relieve patient suffering. Senior leaders speak hollow words, behind which staff find disinterest or worse, disdain. Such management mendacity depletes the reservoir staff have to share with patients, caregivers and coworkers. It's hard to believe things can become any sadder, but a Kindred-Gentiva combination may do just that. Godspeed.

  2. The equity float produced $267 million for Kindred to put toward the Gentiva deal.