Vanguard Health Systems Announces Pricing of Senior Notes
March 27 2012 - 6:16PM
Business Wire
Vanguard Health Systems, Inc. (NYSE: VHS) (“Vanguard”) announced
today that its wholly-owned subsidiaries, Vanguard Health Holding
Company II, LLC (“VHS Holdco II”) and Vanguard Holding Company II,
Inc. (together with VHS Holdco II, the “Issuers”), priced an
aggregate principal amount of $375.0 million of 7.750% Senior Notes
due 2019 (the “New Notes”) in a private placement pursuant to the
indenture, dated as of January 26, 2011 (the “Indenture”),
governing its existing 7.750% Senior Notes due 2019 (the “Existing
Notes”). The New Notes will be issued at an offering price of
99.25% plus accrued interest from February 1, 2012.
The New Notes will bear interest at a rate of 7.750% per annum.
The Issuers will pay interest semi-annually in cash in arrears on
February 1 and August 1 of each year, beginning on August 1, 2012.
The New Notes will mature on February 1, 2019. The New Notes will
be issued as additional notes under the Indenture. The New Notes
are expected to be treated as a single series with the Existing
Notes, except that (i) the New Notes will be subject to a separate
registration rights agreement and (ii) unless and until the New
Notes are registered, the New Notes will have a different CUSIP
number from that of the Existing Notes and will not be fungible
with the Existing Notes.
The Issuers intend to use the net proceeds from the offering of
the New Notes for general corporate purposes, which may include,
but not be limited to, working capital, capital expenditures,
acquisitions, the repayment of any outstanding indebtedness under
Vanguard’s existing revolving credit facility, and to pay the fees
and expenses incurred in connection with the offering.
The New Notes have not been registered under the Securities Act
of 1933, as amended (the “Securities Act”). The New Notes may not
be offered or sold within the United States or to U.S. persons,
except to “qualified institutional buyers” in reliance on the
exemption from registration provided by Rule 144A and to certain
persons in offshore transactions in reliance on Regulation S. You
are hereby notified that sellers of the New Notes may be relying on
the exemption from the provisions of Section 5 of the Securities
Act provided by Rule 144A. This announcement does not constitute an
offer to sell or the solicitation of an offer to buy New Notes in
any jurisdiction in which such an offer or sale would be
unlawful.
Company Information and Forward-Looking Statements
About Vanguard Health Systems
Vanguard owns and operates 28 acute care and specialty hospitals
and complementary facilities and services in metropolitan Chicago,
Illinois; metropolitan Phoenix, Arizona; metropolitan Detroit,
Michigan; San Antonio, Texas; Harlingen and Brownsville, Texas; and
Worcester and metropolitan Boston, Massachusetts. Vanguard’s
strategy is to develop locally branded, comprehensive healthcare
delivery networks in urban markets.
This press release contains “forward-looking statements” within
the meaning of the federal securities laws that are intended to be
covered by safe harbors created thereby. Forward-looking statements
are those statements that are based upon management’s plans,
objectives, goals, strategies, future events, future revenue or
performance, capital expenditures, financing needs, plans or
intentions relating to acquisitions, business trends and other
information that is not historical information. These statements
are based upon estimates and assumptions made by Vanguard’s
management that, although believed to be reasonable, are subject to
numerous factors, risks and uncertainties that could cause actual
outcomes and results to be materially different from those
projected. When used in this press release, the words “estimates,”
“expects,” “anticipates,” “projects,” “plans,” “intends,”
“believes,” “forecasts,” “continues” or future or conditional
verbs, such as “will,” “should,” “could” or “may,” and variations
of such words or similar expressions are intended to identify
forward-looking statements. These factors, risks and uncertainties
include, but are not limited to: Vanguard’s high degree of leverage
and interest rate risk; Vanguard’s ability to incur substantially
more debt; operating and financial restrictions in Vanguard’s debt
agreements; Vanguard’s ability to generate cash necessary to
service its debt; weakened economic conditions and volatile capital
markets; potential liability related to disclosures of
relationships between physicians and Vanguard’s hospitals;
post-payment claims reviews by governmental agencies could result
in additional costs to Vanguard; Vanguard’s ability to grow its
business and successfully implement its business strategies;
Vanguard’s ability to successfully integrate The Detroit Medical
Center, Valley Baptist Health System, and hospitals acquired in the
future or to recognize expected synergies from such acquisitions;
potential acquisitions could be costly, unsuccessful or subject
Vanguard to unexpected liabilities; conflicts of interest that may
arise as a result of Vanguard’s control by a small number of
stockholders; the highly competitive nature of the healthcare
industry; governmental regulation of the healthcare industry,
including Medicare and Medicaid reimbursement levels in general and
with respect to the impact of the Budget Control Act of 2011 and
other future deficit reduction plans; a reduction or elimination of
supplemental Medicare and Medicaid payments, including
disproportionate share payments, indirect medical
education/graduate medical education payments and other similar
payments, would adversely impact Vanguard’s liquidity, results of
operations and financial condition; pressures to contain costs by
managed care organizations and other insurers and Vanguard’s
ability to negotiate acceptable terms with these third party
payers; Vanguard’s ability to attract and retain qualified
management and healthcare professionals, including physicians and
nurses; the currently unknown effect on Vanguard of the major
federal healthcare reforms enacted by Congress in March 2010 or
other potential additional federal or state healthcare reforms;
potential adverse impact of known and unknown governmental
investigations and audits; Vanguard’s failure to adequately enhance
its facilities with technologically advanced equipment could
adversely affect its revenues and market position; the availability
of capital to fund Vanguard’s corporate growth strategy and
improvement to its existing facilities; potential lawsuits or other
claims asserted against Vanguard; Vanguard’s ability to maintain or
increase patient membership in and to control costs of its managed
healthcare plans; failure of the Arizona Health Care Cost
Containment System (“AHCCCS”) to renew its contract with, or award
future contracts to, Phoenix Health Plan would materially affect
Vanguard’s business, profitability, financial condition and results
of operations; Phoenix Health Plan’s ability to comply with the
terms of its contract with AHCCCS, as noncompliance could subject
it to fines, penalties or termination of its contract, which would
materially affect Vanguard’s business, profitability, financial
condition and results of operations; Vanguard’s inability to manage
health plan claims expense within its health plans could reduce its
profitability and adversely impact its liquidity and financial
position; reductions in the enrollment of Vanguard’s health plans
could have an adverse effect on its business and profitability;
changes in general economic conditions nationally and regionally in
Vanguard’s markets; Vanguard’s exposure to the increased amounts of
and collection risks associated with uninsured accounts and the
co-pay and deductible portions of insured accounts; dependence on
Vanguard’s senior management team and local management personnel;
volatility of professional and general liability insurance for
Vanguard and the physicians who practice at its hospitals and
increases in the quantity and severity of professional liability
claims; Vanguard’s ability to achieve operating and financial
targets and to maintain and increase patient volumes and control
the costs of providing services, including salaries and benefits,
supplies and other operating expenses; increased compliance costs
from further government regulation of the healthcare industry and
Vanguard’s failure to comply, or allegations of Vanguard’s failure
to comply, with applicable laws and regulations; the geographic
concentration of Vanguard’s operations; technological and
pharmaceutical improvements that increase the cost of providing, or
reduce the demand for, healthcare services and shift demand for
inpatient services to outpatient settings; a failure of Vanguard’s
information systems would adversely impact Vanguard’s ability to
manage its operations; delays in receiving payments for services
provided, especially from governmental payers; changes in revenue
mix, including changes in Medicaid eligibility criteria and
potential declines in the population covered under managed care
agreements; costs and compliance risks associated with Section 404
of the Sarbanes-Oxley Act of 2002; material non-cash charges to
earnings from impairment of goodwill associated with declines in
the fair market value of Vanguard’s reporting units; volatility of
materials and labor costs for, or state efforts to regulate,
potential construction projects that may be necessary for future
growth; changes in accounting practices; and Vanguard’s ability to
demonstrate meaningful use of certified electronic health record
technology and to receive the related Medicare or Medicaid
incentive payments.
Vanguard’s forward-looking statements speak only as of the date
made. Except as required by law, Vanguard undertakes no obligation
to publicly update or revise any forward-looking statements
contained herein, whether as a result of new information, future
events or otherwise. Vanguard advises you, however, to consult any
additional disclosures Vanguard makes in Vanguard’s other filings
with the Securities and Exchange Commission. You are cautioned not
to rely on such forward-looking statements when evaluating the
information contained in this press release. In light of
significant uncertainties inherent in the forward-looking
statements included in this press release, you should not regard
the inclusion of such information as a representation by Vanguard
that the objectives and plans anticipated by the forward-looking
statements will occur or be achieved or, if any of them do, what
impact they will have on Vanguard’s financial condition, results of
operations or cash flows.
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