Surgery Partners, Inc. Announces New Senior Notes Offering

Rhea-AI Summary

Surgery Partners, Inc. (NASDAQ: SGRY) plans to offer $600 million in senior unsecured notes due 2032 through its subsidiary Surgery Center Holdings, Inc. The proceeds will be used to redeem existing notes, pay accrued interest, cover fees, and fund acquisitions. The offering targets qualified institutional buyers in the US and non-US persons under specific regulations.

Insights

Financial Analyst

The issuance of $600 million in senior unsecured notes by Surgery Partners is a strategic financial maneuver aimed at optimizing the company's capital structure. By intending to redeem their outstanding notes with higher interest rates, the company is potentially reducing its cost of capital. This is significant because the interest expense savings can directly impact the company's net income, thus potentially improving earnings per share (EPS). However, the success of this strategy hinges on the interest rates of the new notes, which are dependent on current market conditions. If the new rates are favorable, this could be a positive signal to investors about the company's financial prudence and creditworthiness.

Further, the allocation of excess proceeds for general corporate purposes and future acquisitions suggests an aggressive growth strategy. This could indicate that the company is actively seeking to expand its market share and enhance its service offerings. While this may be promising for long-term growth, it also introduces risks associated with integration and execution. Investors should monitor the company's acquisition targets and their subsequent integration performance to assess the potential impact on the company's financial health and stock valuation.

Debt Market Analyst

The offering of senior unsecured notes is a noteworthy event within the debt market, as it reflects Surgery Partners' credit standing and investors' appetite for the company's debt. The fact that these notes come with a guarantee from the company's domestic subsidiaries can be seen as an effort to make the notes more attractive to potential investors by providing an additional layer of security. This is particularly relevant in an environment where investors may be seeking higher yields in exchange for taking on more risk.

However, the reliance on 'qualified institutional buyers' and the exclusion of general public participation due to the private nature of the offering (Rule 144A and Regulation S) are constraints that limit market participation. This could potentially affect the liquidity of these notes in the secondary market. Investors in the debt market should consider the implications of the notes' liquidity and the company's long-term ability to meet its debt obligations, especially in relation to its growth and acquisition strategy which could either bolster the company's earnings or strain its financials.

M&A Analyst

The earmarking of funds for future acquisitions by Surgery Partners indicates a strategic move towards consolidation and expansion within the healthcare services industry. The ability to fund acquisitions can be a double-edged sword; on one hand, it can lead to increased market presence and economies of scale, while on the other, it can result in integration challenges and a potential dilution of company culture. It is essential to evaluate the synergies of any future acquisitions and their alignment with the company's core competencies and strategic direction.

Given the competitive nature of the healthcare industry, with its high regulatory hurdles and complex reimbursement landscape, any acquisition must be scrutinized for its potential to add value to Surgery Partners' operational and financial performance. The success of these acquisitions will be a critical factor for the company's future profitability and market position. Investors should look for a track record of successful integrations and accretive acquisitions that contribute positively to the company's earnings before interest, taxes, depreciation and amortization (EBITDA).

BRENTWOOD, Tenn., March 26, 2024 (GLOBE NEWSWIRE) -- Surgery Partners, Inc. (NASDAQ:SGRY) (“Surgery Partners” or the “Company”), a leading short-stay surgical facility owner and operator, announced today that Surgery Center Holdings, Inc., a wholly owned subsidiary of the Company (the “Issuer”), intends to offer, subject to market and other considerations, $600,000,000 aggregate principal amount of senior unsecured notes due 2032 (the “Notes”). The Notes will be guaranteed (the “Guarantees”) on a senior unsecured basis by each domestic wholly-owned subsidiary of the Issuer that guarantees its obligations under its senior secured credit facilities. The terms of the Notes, including interest rate and principal amount, will depend on market conditions at the time of pricing and will be determined by negotiations among Surgery Partners and the initial purchasers of the Notes.

Surgery Partners intends to use the net proceeds from this offering to redeem all of the Issuer’s outstanding 6.750% senior unsecured notes due July 1, 2025 and 10.000% senior unsecured notes due April 15, 2027, to pay the accrued interest on such notes and to pay related fees and expenses in connection with this offering and such redemptions. The excess proceeds from this offering will be used for general corporate purposes, including to fund future acquisitions.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy securities, nor shall there be any offer, solicitation or sale in any jurisdiction in which, or to any person to whom, such offer, solicitation or sale would be unlawful. The Notes and the Guarantees are being offered and sold only to persons reasonably believed to be “qualified institutional buyers” in the United States pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act. The Notes and the Guarantees have not been, and will not be, registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state laws.

About Surgery Partners

Headquartered in Brentwood, Tennessee, Surgery Partners is a leading healthcare services company with a differentiated outpatient delivery model focused on providing high quality, cost effective solutions for surgical and related ancillary care in support of both patients and physicians. Founded in 2004, Surgery Partners is one of the largest and fastest growing surgical services businesses in the country, with more than 180 locations in 33 states, including ambulatory surgery centers, surgical hospitals, multi-specialty physician practices and urgent care facilities.

Forward-Looking Statements

This press release contains forward-looking statements, including those regarding Surgery Partners’ intention to offer and sell, and apply the net proceeds of, the Notes. These statements include, but are not limited to, the Company’s expectations regarding the proposed offering. These statements can be identified by the use of words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “continues,” “estimates,” “predicts,” “projects,” “forecasts,” and similar expressions. All forward-looking statements are based on current expectations and beliefs as of the date of this release and are subject to risks, uncertainties and other factors that may cause actual results to differ materially from the expectations discussed in, or implied by, the forward-looking statements. Many of these factors are beyond our ability to control or predict including, without limitation, the risks and uncertainties identified and discussed in the Company’s reports filed with the SEC, including in Item 1A under the heading "Risk Factors" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Except as required by law, neither the Company nor the Issuer undertakes any obligation to revise or update publicly any forward-looking statements to reflect events or circumstances after the date of this report, or to reflect the occurrence of unanticipated events or circumstances.

Contact:
Surgery Partners Investor Relations
(615) 234-8940
IR@surgerypartners.com

FAQ

What is Surgery Partners, Inc.'s ticker symbol?

Surgery Partners, Inc.'s ticker symbol is SGRY.

How much does Surgery Partners, Inc. plan to offer in senior unsecured notes?

Surgery Partners, Inc. plans to offer $600,000,000 in senior unsecured notes due 2032.

How will the net proceeds from the offering be utilized?

The net proceeds from the offering will be used to redeem existing notes, pay accrued interest, cover fees, and fund future acquisitions.

Who are the target buyers for the Notes and Guarantees?

The Notes and Guarantees are being offered to qualified institutional buyers in the US and non-US persons under specific regulations.

Are the Notes and Guarantees registered under the Securities Act?

The Notes and Guarantees have not been registered under the Securities Act or state securities laws and may not be offered or sold in the US without registration or an applicable exemption.