STOCK TITAN

Select Medical Holdings Corporation and Concentra Group Holdings Parent, Inc. Announce Pricing of Offering of $650 Million of 6.875% Senior Notes due 2032 by Concentra Escrow Issuer Corporation

Rhea-AI Impact
(Neutral)
Rhea-AI Sentiment
(Neutral)
Tags
Rhea-AI Summary

Select Medical Holdings (NYSE: SEM) and Concentra Group Holdings Parent announced that Concentra Escrow Issuer has priced an offering of $650 million in senior notes due in 2032 at an interest rate of 6.875%.

This offering is part of Select's plan to separate from Concentra, its wholly-owned occupational health services business. Conditions include securing additional financing and merging Issuer with Concentra Health Services, Inc. (CHSI). Upon merging, CHSI will assume Issuer’s obligations under the notes.

The offering is set to close independently of the merger, which is expected in Q3 2024. Proceeds will be held in escrow until the merger completion. If the merger does not occur by September 30, 2024, the notes will be redeemed at 100% of their issue price plus accrued interest. Concentra plans to use $50 million from the offering for corporate purposes and the remainder to pay dividends to Select Medical These notes are available only to qualified institutional buyers and are not registered under the Securities Act.

Positive
  • Concentra Escrow Issuer has priced $650 million in senior notes at 6.875%, securing significant funding.
  • The proceeds will be used for corporate purposes and dividend payments, potentially benefiting shareholders.
  • The offering proceeds are held in escrow pending merger completion, ensuring financial security.
Negative
  • The merger's completion is uncertain and if not done by September 30, 2024, the notes will be mandatorily redeemed.
  • The offering depends on additional required financing, adding an element of risk.

Insights

The announcement regarding Concentra's $650 million senior notes offering due 2032 at a rate of 6.875% could have several implications for investors. Senior notes are a type of debt that takes precedence over other unsecured or subordinated debt in the event of liquidation. The relatively high interest rate suggests that Concentra is paying a premium to attract investors, which could imply higher risk associated with the debt. The merger with Concentra Health Services, Inc. and the subsequent guarantees by Concentra and its subsidiaries aim to provide additional security to investors.

The proceeds' partial use for general corporate purposes and to pay dividends to Select Medical Corporation signals a dual focus on operational needs and shareholder returns. However, the reliance on securing additional financing and the potential for mandatory redemption if the merger does not occur by September 30, 2024, introduces uncertainty. For retail investors, understanding the terms and risks associated with these senior notes is important before making investment decisions.

From a market perspective, the issuance of senior notes often indicates a company's need to raise capital for strategic initiatives. The separation of Concentra from Select Medical Holdings is significant as it could lead to a more focused business strategy for both entities. Concentra can concentrate on its core occupational health services, while Select Medical could streamline its operations without the occupational health division. The market typically views such separations positively if they result in value creation for shareholders.

However, the success of this strategy hinges on the successful consummation of the merger and the efficient use of the raised capital. If the merger fails to happen, the special mandatory redemption could lead to return of funds with minimal gains for investors. Retail investors should monitor updates regarding the merger's progress and assess the potential long-term benefits against the short-term risks.

MECHANICSBURG, Pa., June 26, 2024 /PRNewswire/ -- Select Medical Holdings Corporation ("Select") (NYSE: SEM) and Concentra Group Holdings Parent, Inc. ("Concentra"), today announced that Concentra Escrow Issuer Corporation ("Issuer"), a wholly-owned subsidiary of Concentra Health Services, Inc. ("CHSI"), has priced its offering of $650 million aggregate principal amount of 6.875% senior notes due 2032. The notes are being offered in connection with Select's previously announced plan to pursue a separation of Concentra, its wholly-owned occupational health services business (the "Separation"). As a step in the process of effectuating the Separation and subject to satisfaction of certain conditions, including securing additional required financing, the Issuer will merge with and into CHSI, with CHSI continuing as the surviving entity (the "Merger"), and CHSI will assume all of the Issuer's obligations under the notes and the related indenture. Upon consummation of the Merger, the notes will be unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Concentra and certain of Concentra's subsidiaries that will also guarantee CHSI's proposed new senior secured credit facilities.

The closing of this offering is not conditioned on the consummation of the Merger. The gross proceeds of the offering will be held in escrow pending the consummation of the Merger, which is currently expected to occur in the third quarter of 2024, although there can be no assurance that such consummation will not be delayed or that it will occur at all. If the Merger is not consummated on or prior to September 30, 2024, then the notes will be subject to a special mandatory redemption at a price of 100% of the initial issue price of the notes, plus accrued and unpaid interest.

Concentra intends to use $50 million of the net proceeds from the offering for general corporate purposes and to pay the remainder, together with the borrowings under its proposed new senior secured credit facility, to Select Medical Corporation as a dividend.

The notes and related guarantees are being offered in a private placement, solely to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), or to persons other than "U.S. persons" outside the United States in compliance with Regulation S under the Securities Act. The notes and related guarantees have not been registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.

This notice does not constitute an offer to sell the notes, nor a solicitation for an offer to purchase the notes, in any jurisdiction in which such offer or solicitation would be unlawful. Any offer of the notes will be made only by means of a private offering memorandum. This press release is being issued pursuant to and in accordance with Rule 135c under the Securities Act.

Cautionary Statement Regarding Forward-Looking Statements

This release contains forward-looking statements. Forward-looking statements use words such as "expect," "anticipate," "outlook," "intend," "plan," "confident," "believe," "will," "should," "would," "potential," "positioning," "proposed," "planned," "objective," "likely," "could," "may," and words of similar meaning, as well as other words or expressions referencing future events, conditions or circumstances. Statements that describe or relate to Select's or Concentra's plans, goals, intentions, strategies, financial outlook, Select's or Concentra's expectations regarding the Merger or the Separation, the aggregate principal amount of the notes to be sold or the intended use of proceeds from the offering of the notes, and statements that do not relate to historical or current fact, are examples of forward-looking statements. Forward-looking statements are based on our current beliefs, expectations and assumptions, which may not prove to be accurate, and involve a number of known and unknown risks and uncertainties, many of which are out of the Select's and Concentra's control. Forward-looking statements are not guarantees of future performance and there are a number of important factors that could cause actual outcomes and results to differ materially from the results contemplated by such forward-looking statements. Additional information concerning these and other factors can be found in Select's filings with the U.S. Securities and Exchange Commission, including Select's most recent annual report on Form 10-K, most recent quarterly report on Form 10-Q and current reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made. Neither Select nor Concentra undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Investor inquiries:
Joel T. Veit
717-972-1100
ir@selectmedicalcorp.com

Cision View original content:https://www.prnewswire.com/news-releases/select-medical-holdings-corporation-and-concentra-group-holdings-parent-inc-announce-pricing-of-offering-of-650-million-of-6-875-senior-notes-due-2032-by-concentra-escrow-issuer-corporation-302183746.html

SOURCE Select Medical Holdings Corporation

FAQ

What is the interest rate on the senior notes offered by Concentra Escrow Issuer ?

The senior notes have an interest rate of 6.875%.

When is the merger between Concentra Escrow Issuer and Concentra Health Services, Inc. expected to occur?

The merger is expected to occur in the third quarter of 2024.

What will happen if the merger is not completed by September 30, 2024?

If the merger is not completed by September 30, 2024, the notes will be subject to a special mandatory redemption at 100% of the initial issue price plus accrued interest.

How much of the net proceeds will Concentra use for general corporate purposes?

Concentra intends to use $50 million of the net proceeds for general corporate purposes.

Where will the senior notes offered by Concentra Escrow Issuer be placed?

The senior notes will be placed in a private offering to qualified institutional buyers and non-U.S. persons in compliance with Regulation S.

What is the ticker symbol for Select Medical Holdings ?

The ticker symbol for Select Medical Holdings is SEM.

SELECT MEDICAL HOLDINGS CORP

NYSE:SEM

SEM Rankings

SEM Latest News

SEM Stock Data

4.98B
106.35M
17%
78.97%
1.56%
Medical Care Facilities
Services-hospitals
Link
United States of America
MECHANICSBURG