Iasis Healthcare Readies Deal

The high yield market will soon see a new player, as Iasis Healthcare Corp. plans to raise $230 million in junk bonds in what appears to be a gutsy move.

Officials from Nashville-based Iasis, which was founded only last year, could not be reached for comment, but analysts who track the firm said it plans to spend about $800 million to snap up some of the assets that are being sold off by Tenet Healthcare and Paracelsus Healthcare. Both of those are also high yield issuers.

Of the total, $280 million of the assets will be purchased from Paracelsus and the remainder is coming from Tenet.

A high yield portfolio manager noted that the purchase price is on the high end of the spectrum - about eight times cash flow, whereas a price of about five to six times would be typical.

High price aside, it's simply a tough time to be dipping into the high yield market for the first time, said healthcare analyst Premila Peters at KDP Investment Advisors, due to a flat market and overall investor apprehension.

Several deals have been postponed over the past few weeks, and those that have been able to price, almost invariably, have increased the coupon.

And things have been especially tough in the healthcare sector, as many of the names have sold off in the secondary market during months of turmoil prompted by changes in federal reimbursements from Medicare.

The $230 million that Iasis hopes to raise in the junk bond market will be used along with a $455 million credit facility plus an equity infusion from Joseph Littlejohn and Levy, the New York investment firm. The bond offering portion is said to be structured in 10-year senior subordinated notes and carry a B3/B- rating.