Encompass Health issues notice for partial redemption of its 5.75% senior notes due 2025

Rhea-AI Summary

Encompass Health (NYSE: EHC) has announced the partial redemption of its 5.75% senior notes due 2025. The company will redeem $150 million of the outstanding principal balance, with the redemption date set for August 15, 2024. The redemption price will be 100.0% of par, plus accrued and unpaid interest. Encompass Health plans to use cash on hand to fund this redemption. As a result of this financial move, the company anticipates recording an approximate $0.4 million loss on early extinguishment of debt in the third quarter of 2024.

Positive

• Partial redemption of senior notes indicates strong cash position
• Redemption at par value (100.0%) suggests favorable financial terms
• Use of cash on hand for redemption demonstrates liquidity strength

Negative

• Expected $0.4 million loss on early extinguishment of debt in Q3 2024

Financial Analyst

Encompass Health's decision to redeem $150 million of its 5.75% senior notes due 2025 is a significant move. By opting to redeem these notes early, the company demonstrates a strong cash position, signaling good liquidity management. Using cash on hand rather than refinancing indicates robust cash flow.

Redeeming the notes at par value plus accrued interest is standard practice. The expected $0.4 million loss on early extinguishment of debt, while noteworthy, is relatively minor in the context of the company’s overall financials. This move will reduce future interest expenses, thus positively impacting future earnings. Long-term investors might view this as a prudent step towards deleveraging the company’s balance sheet, which can increase financial stability.

However, it’s important for investors to monitor how this impacts the company’s cash reserves and whether it influences other planned investments or operational activities. The reduction in debt might increase the company’s attractiveness to conservative investors looking for lower-risk profiles.

Market Research Analyst

The redemption of these senior notes highlights Encompass Health’s strategy to optimize its capital structure. From a market perspective, this could be interpreted as a signal of stability and confidence, potentially enhancing investor sentiment.

In the healthcare sector, maintaining a healthy balance sheet is crucial, especially given the capital-intensive nature of the industry. This move may lead to an uptick in the company's stock price if the market views this action favorably. Furthermore, reducing debt obligations can provide the company with more flexibility to pursue strategic initiatives, such as acquisitions or investments in new technologies and services.

It is also essential to consider the broader economic environment. With interest rates potentially fluctuating, locking in the current financial position by reducing debt could be a wise decision. Investors should keep an eye on how this impacts the company’s overall strategic goals and market positioning in the coming years.

BIRMINGHAM, Ala., July 15, 2024 /PRNewswire/ -- Encompass Health Corporation (NYSE: EHC) today issued notice for redemption of $150 million of the outstanding principal balance of its 5.75% senior notes due 2025 (the "2025 Notes"). The associated redemption date will be August 15, 2024, and the redemption price will be 100.0% of par, plus accrued and unpaid interest pursuant to the terms of the 2025 Notes. The Company plans to use cash on hand to fund the redemption. As a result of this redemption, the Company expects to record an approximate $0.4 million loss on early extinguishment of debt in the third quarter of 2024.

About Encompass Health 
Encompass Health (NYSE: EHC) is the largest owner and operator of rehabilitation hospitals in the United States. With a national footprint that includes 163 hospitals in 37 states and Puerto Rico, the Company provides high-quality, compassionate rehabilitative care for patients recovering from a major injury or illness, using advanced technology and innovative treatments to maximize recovery. Encompass Health is ranked as one of Fortune's World's Most Admired Companies and Modern Healthcare's Best Places to Work in Healthcare. For more information, visit encompasshealth.com, or follow us on our newsroom, Twitter, Instagram and Facebook.

Forward-Looking Statements
Statements contained in this press release which are not historical facts are forward-looking statements. In addition, Encompass Health, through its senior management, may from time to time make forward-looking public statements concerning the matters described herein. All such estimates, projections, and forward-looking information speak only as of the date hereof, and Encompass Health undertakes no duty to publicly update or revise such forward-looking information, whether as a result of new information, future events, or otherwise. Such forward-looking statements are necessarily estimates based upon current information and involve a number of risks and uncertainties. Actual events or results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors which could cause actual events or results to differ materially from those estimated by Encompass Health include, but are not limited to, potential disruptions, breaches, or other incidents affecting the proper operation, availability, or security of Encompass Health's information systems, including unauthorized access to or theft of patient, business associate, or other sensitive information; changes, delays in (including in connection with resolution of Medicare payment reviews or appeals), or suspension of reimbursement for Encompass Health's services by governmental or private payors; a significant market disruption; and other factors which may be identified from time to time in Encompass Health's SEC filings and other public announcements, including its Form 10-K for the year ended Dec. 31, 2023 and Form 10-Q for the quarter ended Mar. 31, 2024.

Media contact:                                                         
Polly Manuel | 205.970.5912                                                         
polly.manuel@encompasshealth.com                                               

Investor Relations contact:
Mark Miller | 205.970.5860
Mark.Miller@encompasshealth.com   

View original content to download multimedia:https://www.prnewswire.com/news-releases/encompass-health-issues-notice-for-partial-redemption-of-its-5-75-senior-notes-due-2025--302196936.html

SOURCE Encompass Health Corp.

FAQ

What is the amount of senior notes Encompass Health (EHC) is redeeming?

Encompass Health is redeeming $150 million of its 5.75% senior notes due 2025.

When is the redemption date for Encompass Health's (EHC) senior notes?

The redemption date for Encompass Health's senior notes is August 15, 2024.

What is the redemption price for Encompass Health's (EHC) 2025 senior notes?

The redemption price is 100.0% of par, plus accrued and unpaid interest.

How will Encompass Health (EHC) fund the redemption of its senior notes?

Encompass Health plans to use cash on hand to fund the redemption of its senior notes.

What financial impact does Encompass Health (EHC) expect from this redemption?

Encompass Health expects to record an approximate $0.4 million loss on early extinguishment of debt in the third quarter of 2024.