Thursday, December 11, 2014
Too Big to Care
The business of hospice keeps getting bigger. Bloomberg reported Kindred Healthcare shortened the maturity on $1.35 billion in junk bonds the company will use to acquire Gentiva. Higher interest rates and shorter maturities are needed to push speculative grade debt.
NASDAQ reported "The notes will be issued in two tranches of $750 million of 8.00 percent senior notes due 2020 at an issue price of 100 percent and $600 million of 8.75 percent senior notes due 2023 at an issue price of 100 percent."
That's $112.5 million in annual interest expenses for this twin set of bonds. Bloomberg did not say how the principal is paid back, in annual installments or a lump sum at maturity. Kindred will float the bonds in two parts. One will have a five year maturity and the other eight years.
Pressure on individual hospices should escalate from higher interest rates, increased overhead and cash needs, including a corporate building expansion. The Courier Journal reported "Kindred Healthcare is planning a $39.5 million expansion of its headquarters along Fourth Street at Broadway, adding up to 500 additional employees over perhaps three years.'
'Kindred officials were joined by Gov. Steve Beshear and Mayor Greg Fischer Thursday afternoon at Theater Square to announce the new jobs and the construction, after the state Economic Development Finance Authority reviewed a set of $11 million in state incentives for the expansion earlier in Frankfort."
I hope the State of Kentucky knows about Gentiva's no raises for years, benefit reductions (PTO and health insurance contributions), as well as Kindred's plans to write President Paul Diaz a $6 million check in March. Someone inside Kindred will benefit from Kentucky taxpayers' generosity. I don't expect it to trickle down.
However, we will need to fund increased overhead and the next executive incentive pay extravaganza. Doesn't it warm the cockles of your heart?
Anonymous (from Gentiva)