Prime Healthcare Services Inc., which focuses on turning around financially distressed hospitals, is scrapping a portion of its bond offering set aside to pay a dividend to its owners, according to three people with knowledge of the matter.
The company is planning to reduce the size of its $700 million bond sale and boost the 7.5 percent yield on the securities to gain investor support, said the people, who asked not to be identified as the information isn’t public. Prime Healthcare had proposed using $100 million of the proceeds for the dividend, according to Standard & Poor’s. The debt sale is being arranged by Wells Fargo & Co. and Barclays Plc.
Andrea Eisenmenger, a spokeswoman for the Ontario, California-based company, didn’t respond to an e-mail and a call before normal business hours. Representatives of Wells Fargo and Barclays declined to comment.
Prime Healthcare has been the subject of an administrative subpoena and investigation from the Department of Justice regarding a labor dispute for over two years, according to its website. Its debt, which is rated six levels below investment grade, may be cut further if it faces an adverse outcome with respect to ongoing investigations or litigation, according to a July 20 Moody’s Investors Service report.
The company owns and operates 27 hospitals focusing on acute care, the report said. The company had about $2.5 billion in revenue in the 12 months through March, according to Moody’s.
Proceeds from the rest of the deal will repay the company’s revolving credit line, refinance a term loan and fund previously announced acquisitions, Moody’s said.