Coventry Health Care, Inc. (CVH) has completed a $600 million public offering of 5.45% Senior Notes due 2021, which was announced on June 2.
Coventry had sold the senior unsecured notes with a 5.45% coupon at a price of $99.80 to yield 5.476% and offered a risk premium of 245 basis points over Treasury.
Additionally, Coventry’s offering also included a provision named change-of-control provision, to safeguard investors against event risks such as acquisition through leveraged buyout or due to some fundamental corporate change. The covenant is triggered at a premium price of $101.
Further, Bank of America Merrill Lynch, a unit of Bank of America Corporation (BAC), Citigroup Inc. (C) and J.P. Morgan Chase & Co. (JPM) acted as active bookrunners for the offering.
Coventry will utilize the net proceeds of Coventry’s offering for the repayment, redemption, or repurchase of existing debt and for other general corporate purposes.
Currently, Coventry's senior unsecured debt, senior unsecured credit facility and corporate family debt are rated "Ba1," including approximately $1.6 billion in debt, by Moody's Investors Service and investment grade at BBB- by Standard & Poor's.
In addition, Moody's is reviewing ratings on Coventry's health care plans including HealthAssurance Pennsylvania Inc., HealthAmerica Pennsylvania Inc. and Group Health Plan Inc., which are currently rated as "Baa1."
Besides, Moody’s, the rating agency A.M. Best Co. had reiterated the financial strength and issuer credit ratings of Coventry's subsidiaries and the debt ratings. It had also revised the outlook to stable from negative for all debt ratings and the majority of the health care subsidiaries of Coventry as of March 2011.
Separately, we believe that Coventry is also growing on the acquisition front, as it is making continuous efforts to expand its footprint in Missouri and Arkansas.
Coventry’s acquisition of Mercy Health Plans and its subsidiaries is expected to be slightly accretive to its 2011 earnings and will serve more than 1.2 million members in its six-state Midwest region.
We believe that Coventry’s acquisitive growth strategy will help it to leverage its regional service centers and improve operating efficiencies, largely through economies of scale.
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