e424b5
Filed Pursuant to
Rule 424(b)(5)
Registration
No. 333-175791
CALCULATION OF
REGISTRATION FEE
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Proposed
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Amount
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maximum
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Proposed maximum
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Amount of
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Title of each class of
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to be
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offering price
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aggregate offering
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registration
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securities to be registered
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registered
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per security
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price
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fee(1)
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6.50% Senior Secured Notes due 2020
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$3,000,000,000
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100.00%
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$3,000,000,000
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$348,300
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7.50% Senior Notes due 2022
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$2,000,000,000
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100.00%
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$2,000,000,000
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$232,200
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(1) |
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Calculated in accordance with Rule 457(r) under the
Securities Act of 1933, as amended. The total registration fee
due for this offering is $580,500. |
(To Prospectus dated July 26,
2011)
HCA Inc.
$5,000,000,000
6.50% Senior Secured
Notes due 2020
7.50% Senior Notes due
2022
Interest payable
February 15 and August 15
HCA Inc. is offering $3,000,000,000 aggregate principal amount
of 6.50% senior secured notes due 2020, which we refer to
as the secured notes, and $2,000,000,000 aggregate
principal amount of 7.50% senior notes due 2022, which we
refer to as the unsecured notes. The secured notes
and unsecured notes are collectively referred to herein as the
notes, unless the context otherwise requires. The
secured notes will bear interest at a rate of 6.50% per annum
and the unsecured notes will bear interest at a rate of 7.50%
per annum. HCA Inc. will pay interest on the notes
semi-annually, in cash in arrears, on February 15 and
August 15 of each year, beginning on February 15,
2012. The secured notes will mature on February 15, 2020
and the unsecured notes will mature on February 15, 2022.
We may redeem the notes, at any time in whole or from time to
time in part, at the redemption prices described in this
prospectus supplement. In addition, if we experience certain
kinds of changes in control, we may be required to repurchase
the notes on the terms described in this prospectus supplement.
If we sell certain assets and do not reinvest the proceeds or
repay indebtedness, we must offer to repurchase the secured
notes.
The notes will be HCA Inc.s senior obligations and will
rank equally and ratably with all of its future senior
indebtedness and senior to any of its future subordinated
indebtedness. The obligations under the unsecured notes will be
fully and unconditionally guaranteed by HCA Holdings, Inc. on a
senior unsecured basis and will rank equally and ratably with
HCA Inc.s existing and future senior indebtedness and
senior to any of its future subordinated indebtedness and will
be structurally subordinated in right of payment to all
obligations of HCA Inc.s subsidiaries. The secured notes
will be fully and unconditionally guaranteed on a senior
unsecured basis by HCA Holdings, Inc. and on a senior secured
basis by each domestic subsidiary that guarantees HCA
Inc.s senior secured credit facilities (as defined
herein), other than certain subsidiaries that guarantee only HCA
Inc.s asset-based revolving credit facility. To the extent
lenders under the senior secured credit facilities release any
guarantor from its obligations, such guarantor will also be
released from its obligations under the secured notes.
The secured notes and related guarantees will be secured by
first-priority liens, subject to permitted liens, on HCA
Inc.s and HCA Inc.s subsidiary guarantors
assets, subject to certain exceptions, that will from time to
time secure HCA Inc.s cash flow credit facility on a
first-priority basis. The secured notes and related guarantees
will be secured by second-priority liens, subject to permitted
liens, on HCA Inc.s and HCA Inc.s subsidiary
guarantors assets that will secure HCA Inc.s
asset-based revolving credit facility on a first-priority basis.
The secured notes will share equally in the collateral (other
than any European collateral securing the European term loan)
securing HCA Inc.s cash flow credit facility and other
first lien notes. To the extent the collateral agent for the
lenders under the cash flow credit facility releases any liens
during any period when the collateral agent has authority to do
so under the first lien intercreditor agreement, the lien
securing the obligations under the notes will also be released.
HCA Inc. intends to use the net proceeds of this offering for
the repayment, redemption or repurchase of its existing debt.
Investing in the notes involves risks. See Risk
factors beginning on page S-21.
Neither the Securities and Exchange Commission nor any other
regulatory body has approved or disapproved of these securities
or determined if this prospectus supplement or the attached
prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
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Proceeds to
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HCA
Inc.(1)
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Public offering
price(1)
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Underwriting discount
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(before expenses)
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Per note
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Total
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Per note
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Total
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Per note
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Total
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6.50% Senior Secured Notes due 2020
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100.00%
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$
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3,000,000,000
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1.125%
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$
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33,750,000
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98.875%
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$
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2,966,250,000
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7.50% Senior Notes due 2022
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100.00%
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$
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2,000,000,000
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1.125%
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$
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22,500,000
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98.875%
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$
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1,977,500,000
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(1)
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Plus accrued interest, if any, from
August 1, 2011.
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The underwriters expect to deliver the notes to investors on or
about August 1, 2011 in book entry form only through the
facilities of The Depository Trust Company.
Joint Book-Running
Managers
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J.P. Morgan
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Barclays Capital
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BofA Merrill Lynch
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Citi
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Deutsche Bank Securities
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Wells Fargo Securities
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July 26, 2011.
You should rely only on the information contained and
incorporated by reference in this prospectus supplement and the
accompanying prospectus. Neither HCA Inc. nor the underwriters
has authorized anyone to provide you with any information or
represent anything about HCA Inc., its financial results or this
offering that is not contained or incorporated by reference in
this prospectus supplement or the accompanying prospectus. If
given or made, any such other information or representation
should not be relied upon as having been authorized by HCA Inc.
or the underwriters. Neither HCA Inc. nor the underwriters is
making an offer to sell these notes in any jurisdiction where
the offer or sale is not permitted. The information contained
and incorporated by reference in this prospectus supplement and
the accompanying prospectus may only be accurate on the date of
this document.
Table of
contents
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Prospectus Supplement
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Page
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S-1
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S-21
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S-36
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S-37
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S-39
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S-49
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S-61
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S-124
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S-144
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S-149
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S-151
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S-155
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S-155
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S-155
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Prospectus
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Page
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About This Prospectus
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1
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Where You Can Find More Information
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1
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Incorporation By Reference
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1
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Forward-Looking Statements
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2
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Our Company
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4
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Risk Factors
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5
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Use of Proceeds
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5
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Ratio of Earnings to Fixed Charges
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5
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Description of Debt Securities and Guarantees
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6
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Plan of Distribution
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22
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Legal Matters
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23
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Experts
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23
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S-i
About this
prospectus supplement
This document is in two parts. The first part is this prospectus
supplement, which describes the terms of the offering of the
notes and adds to and supplements information contained in the
accompanying prospectus and the documents incorporated by
reference therein. The second part is the accompanying
prospectus, which we refer to as the accompanying
prospectus. The accompanying prospectus contains a
description of our debt securities and gives more general
information, some of which may not apply to the notes. The
accompanying prospectus also incorporates by reference documents
that are described under Incorporation by Reference
in that prospectus.
You should rely only on the information contained or
incorporated by reference in this prospectus supplement, in the
accompanying prospectus or in any free writing prospectus filed
by us with the Securities and Exchange Commission. If
information in this prospectus supplement is inconsistent with
the accompanying prospectus, you should rely on this prospectus
supplement. We have not, and the underwriters have not,
authorized any other person to provide you with different
information. If anyone provides you with different or
inconsistent information, you should not rely on it. You should
not assume that the information contained or incorporated by
reference in this prospectus supplement and the accompanying
prospectus or in any such free writing prospectus is accurate as
of any date other than the respective dates thereof. Our
business, financial condition, results of operations and
prospects may have changed since those dates.
We are not, and the underwriters are not, making an offer of the
notes in any jurisdiction where the offer or sale is not
permitted.
Market, ranking
and other industry data
The data included or incorporated by reference in this
prospectus supplement regarding markets and ranking, including
the size of certain markets and our position and the position of
our competitors within these markets, are based on reports of
government agencies or published industry sources and estimates
based on managements knowledge and experience in the
markets in which we operate. These estimates have been based on
information obtained from our trade and business organizations
and other contacts in the markets in which we operate. We
believe these estimates to be accurate as of the date of this
prospectus supplement. However, this information may prove to be
inaccurate because of the method by which we obtained some of
the data for the estimates or because this information cannot
always be verified with complete certainty due to the limits on
the availability and reliability of raw data, the voluntary
nature of the data gathering process and other limitations and
uncertainties. As a result, you should be aware that market,
ranking and other similar industry data included or incorporated
by reference in this prospectus supplement, and estimates and
beliefs based on that data, may not be reliable. Neither we nor
the underwriters can guarantee the accuracy or completeness of
any such information contained or incorporated by reference in
this prospectus supplement.
S-ii
Forward-looking
and cautionary statements
This prospectus supplement and the accompanying prospectus
contain and incorporate by reference forward-looking
statements within the meaning of the federal securities
laws, which involve risks and uncertainties. Forward-looking
statements include all statements that do not relate solely to
historical or current facts, and you can identify
forward-looking statements because they contain words such as
believes, expects, may,
will, should, seeks,
approximately, intends,
plans, estimates, projects,
continue, initiative or
anticipates or similar expressions that concern our
prospects, objectives, strategies, plans or intentions. All
statements made relating to our estimated and projected
earnings, margins, costs, expenditures, cash flows, growth rates
and financial results or to the impact of existing or proposed
laws or regulations described or incorporated by reference in
this prospectus supplement and the accompanying prospectus are
forward-looking statements. These forward-looking statements are
subject to risks and uncertainties that may change at any time,
and, therefore, our actual results may differ materially from
those expected. We derive many of our forward-looking statements
from our operating budgets and forecasts, which are based upon
many detailed assumptions. While we believe that our assumptions
are reasonable, it is very difficult to predict the impact of
known factors, and, of course, it is impossible to anticipate
all factors that could affect our actual results.
Some of the important factors that could cause actual results to
differ materially from our expectations are disclosed under
Risk factors and elsewhere in or incorporated by
reference in this prospectus supplement and the accompanying
prospectus. All subsequent written and oral forward-looking
statements attributable to us, or persons acting on our behalf,
are expressly qualified in their entirety by these cautionary
statements.
We do not undertake any obligation to publicly update or revise
any forward-looking statement as a result of new information,
future events or otherwise, except as otherwise required by law.
S-iii
Summary
This summary highlights information appearing elsewhere in
and incorporated by reference in this prospectus supplement and
the accompanying prospectus. This summary is not complete and
does not contain all of the information that you should consider
before investing in the notes. You should carefully read the
entire prospectus supplement, the accompanying prospectus and
the information incorporated herein by reference, including the
financial data and related notes and the section entitled
Risk factors.
As used herein, unless otherwise stated or indicated by
context, references to (i) the Issuer refer to
HCA Inc. and its affiliates, (ii) HCA Holdings,
Inc. refer to HCA Holdings, Inc., parent of HCA Inc., and
its affiliates and (iii) the Company,
HCA, we, our or
us refer to HCA Inc. and its affiliates prior
to the Corporate Reorganization (as defined herein) and to
HCA Holdings, Inc. and its affiliates upon the consummation
of the Corporate Reorganization. The term affiliates
means direct and indirect subsidiaries and partnerships and
joint ventures in which such subsidiaries are partners. The
terms facilities or hospitals refer to
entities owned and operated by affiliates of HCA and the term
employees refers to employees of affiliates of
HCA.
Our
company
We are the largest non-governmental hospital operator in the
U.S. and a leading comprehensive, integrated provider of
health care and related services. We provide these services
through a network of acute care hospitals, outpatient
facilities, clinics and other patient care delivery settings. As
of March 31, 2011, we operated a diversified portfolio of
163 hospitals (with approximately 41,000 beds) and 107
freestanding surgery centers across 20 states throughout
the U.S. and in England. As a result of our efforts to
establish significant market share in large and growing urban
markets with attractive demographic and economic profiles, we
currently have a substantial market presence in 14 of the top 25
fastest growing markets with populations greater than 500,000 in
the U.S. and currently maintain the first or second
position, based on inpatient admissions, in many of our key
markets. We believe our ability to successfully position and
grow our assets in attractive markets and execute our operating
plan has contributed to the strength of our financial
performance over the last several years. For the three months
ended March 31, 2011, we generated revenues of
$8.055 billion, net income attributable to HCA Holdings,
Inc. of $240 million and Adjusted EBITDA of
$1.590 billion.
Our patient-first strategy is to provide high quality health
care services in a cost-efficient manner. We intend to build
upon our history of profitable growth by maintaining our
dedication to quality care, increasing our presence in key
markets through organic expansion and strategic acquisitions and
joint ventures, leveraging our scale and infrastructure, and
further developing our physician and employee relationships. We
believe pursuing these core elements of our strategy helps us
develop a faster-growing, more stable and more profitable
business and increases our relevance to patients, physicians,
payers and employers.
Using our scale, significant resources and over 40 years of
operating experience, we have developed a significant management
and support infrastructure. Some of the key components of our
support infrastructure include a revenue cycle management
organization, a health care group purchasing organization
(GPO), an information technology and services
provider, a nurse staffing agency and a medical malpractice
insurance underwriter. These shared services have helped us to
maximize our cash collection efficiency, achieve savings in
purchasing through
S-1
our scale, more rapidly deploy information technology upgrades,
more effectively manage our labor pool and achieve greater
stability in malpractice insurance premiums. Collectively, these
components have helped us to further enhance our operating
effectiveness, cost efficiency and overall financial results. We
have also created a subsidiary, Parallon Business Solutions,
that offers certain of these component services to other health
care companies.
Since the founding of our business in 1968 as a single-facility
hospital company, we have demonstrated an ability to
consistently innovate and sustain growth during varying economic
and regulatory climates. Under the leadership of an experienced
senior management team, whose tenure at HCA averages over
20 years, we have established an extensive record of
providing high quality care, profitably growing our business,
making and integrating strategic acquisitions and efficiently
and strategically allocating capital spending.
On November 17, 2006, HCA Inc. was acquired by a private
investor group comprised of affiliates of or funds sponsored by
Bain Capital Partners, LLC (Bain Capital), Kohlberg
Kravis Roberts & Co. (KKR), Merrill Lynch
Global Private Equity (MLGPE), now BAML Capital
Partners (each a Sponsor), Citigroup Inc., Bank of
America Corporation (the Sponsor Assignees) and HCA
founder Dr. Thomas F. Frist, Jr. (the Frist
Entities), a group we collectively refer to as the
Investors, and by members of management and certain
other investors. We refer to the merger, the financing
transactions related to the merger and other related
transactions collectively as the Recapitalization.
Since the Recapitalization, we have achieved substantial
operational and financial progress. During this time, we have
made significant investments in expanding our service lines and
expanding our alignment with highly specialized and primary care
physicians. In addition, we have enhanced our operating
efficiencies through a number of corporate cost-saving
initiatives and an expansion of our support infrastructure. We
have made investments in information technology to optimize our
facilities and systems. We have also undertaken a number of
initiatives to improve clinical quality and patient
satisfaction. As a result of these initiatives, our financial
performance has improved significantly from the year ended
December 31, 2007, the first full year following the
Recapitalization, to the year ended December 31, 2010, with
revenues growing by $3.825 billion, net income attributable
to HCA Holdings, Inc. increasing by $333 million and
Adjusted EBITDA increasing by $1.276 billion. This
represents compounded annual growth rates on these key metrics
of 4.5%, 11.4% and 8.5%, respectively.
Our
industry
We believe well-capitalized, comprehensive and integrated health
care delivery providers are well-positioned to benefit from the
current industry trends, some of which include:
Aging Population and Continued Growth in the Need for Health
Care Services. According to the U.S. Census
Bureau, the demographic age group of persons aged 65 and over is
expected to experience compounded annual growth of 3.0% over the
next 20 years, and constitute 19.3% of the total
U.S. population by 2030. The Centers for
Medicare & Medicaid Services (CMS)
projects continued increases in hospital services based on the
aging of the U.S. population, advances in medical
procedures, expansion of health coverage, increasing consumer
demand for expanded medical services and increased prevalence of
chronic conditions such as diabetes, heart disease and obesity.
We believe these factors will continue to drive increased
utilization of health care services and the need for
comprehensive,
S-2
integrated hospital networks that can provide a wide array of
essential and sophisticated health care.
Continued Evolution of Quality-Based Reimbursement Favors
Large-Scale, Comprehensive and Integrated Providers. We
believe the U.S. health care system is continuing to evolve
in ways that favor large-scale, comprehensive and integrated
providers that provide high levels of quality care.
Specifically, we believe there are a number of initiatives that
will continue to gain importance in the foreseeable future,
including introduction of value-based payment methodologies tied
to performance, quality and coordination of care, implementation
of integrated electronic health records and information, and an
increasing ability for patients and consumers to make choices
about all aspects of health care. We believe our company is well
positioned to respond to these emerging trends and has the
resources, expertise and flexibility necessary to adapt in a
timely manner to the changing health care regulatory and
reimbursement environment.
Impact of Health Reform Law. The Patient Protection
and Affordable Care Act, as amended by the Health Care and
Education Reconciliation Act of 2010 (collectively, the
Health Reform Law), will change how health care
services are covered, delivered and reimbursed. It will do so
through expanded coverage of uninsured individuals, significant
reductions in the growth of Medicare program payments, material
decreases in Medicare and Medicaid disproportionate share
hospital (DSH) payments, and the establishment of
programs where reimbursement is tied in part to quality and
integration. The Health Reform Law, as enacted, is expected to
expand health insurance coverage to approximately 32 to
34 million additional individuals through a combination of
public program expansion and private sector health insurance
reforms. We believe the expansion of private sector and Medicaid
coverage will, over time, increase our reimbursement related to
providing services to individuals who were previously uninsured.
On the other hand, the reductions in the growth in Medicare
payments and the decreases in DSH payments will adversely affect
our government reimbursement. Because of the many variables
involved, including pending court challenges, the potential for
changes to the law as a result and efforts to amend or repeal
the law, we are unable to predict the net impact of the Health
Reform Law on us; however, we believe our experienced management
team, emphasis on quality care and diverse service offerings
will enable us to capitalize on the opportunities presented by
the Health Reform Law, as well as adapt in a timely manner to
its challenges.
Our
competitive strengths
We believe our key competitive strengths include:
Largest Comprehensive, Integrated Health Care Delivery
System. We are the largest non-governmental hospital
operator in the U.S., providing approximately 4% to 5% of all
U.S. hospital services through our national footprint. The
scope and scale of our operations, evidenced by the types of
facilities we operate, the diverse medical specialties we offer
and the numerous patient care access points we provide, enable
us to provide a comprehensive range of health care services in a
cost-effective manner. As a result, we believe the breadth of
our platform is a competitive advantage in the marketplace
enabling us to attract patients, physicians and clinical staff
while also providing significant economies of scale and
increasing our relevance with commercial payers.
S-3
Reputation for High Quality Patient-Centered
Care. Since our founding, we have maintained an
unwavering focus on patients and clinical outcomes. We believe
clinical quality influences physician and patient choices about
health care delivery. We align our quality initiatives
throughout the organization by engaging corporate, local,
physician and nurse leaders to share best practices and develop
standards for delivering high quality care. We have invested
extensively in quality of care initiatives, with an emphasis on
implementing information technology and adopting industry-wide
best practices and clinical protocols. As a result of these
efforts, we have achieved significant progress in clinical
quality. As measured by the CMS clinical core measures reported
on the CMS Hospital Compare website and based on publicly
available data for the twelve months ended June 30, 2010,
our hospitals achieved a composite score of 98.5% of the CMS
core measures versus the national average of 95.5%, making us
among the top performing major health systems in the
U.S. In addition, as required by the Health Reform Law, CMS
will establish a value-based purchasing system and will adjust
hospital payment rates based on hospital-acquired conditions and
hospital readmissions. We also believe our quality initiatives
favorably position us in a payment environment that is
increasingly performance-based.
Leading Local Market Positions in Large, Growing, Urban
Markets. Over our history, we have sought to
selectively expand and upgrade our asset base to create a
premium portfolio of assets in attractive growing markets. As a
result, we have a strong market presence in 14 of the top 25
fastest growing markets with populations greater than 500,000 in
the U.S. We currently operate in 29 markets, 19 of which
have populations of one million or more, with all but two
of these markets projecting growth above the national average
from 2011 to 2016. Our inpatient market share places us first or
second in many of our key markets. We believe the strength and
stability of these market positions will create organic growth
opportunities and allow us to develop long-term relationships
with patients, physicians, large employers and third-party
payers.
Diversified Revenue Base and Payer Mix. We believe
our broad geographic footprint, varied service lines and diverse
revenue base mitigate our risks in numerous ways. Our
diversification limits our exposure to competitive dynamics and
economic conditions in any single local market, reimbursement
changes in specific service lines and disruptions with respect
to payers such as state Medicaid programs or large commercial
insurers. We have a diverse portfolio of assets with no single
facility contributing more than 2.3% of our revenues and no
single metropolitan statistical area contributing more than 8.0%
of revenues for the year ended December 31, 2010. We have
also developed a highly diversified payer base, including
approximately 3,000 managed care contracts, with no single
commercial payer representing more than 8% of revenues for the
year ended December 31, 2010. In addition, we are one of
the countrys largest providers of outpatient services,
which accounted for approximately 38% of our revenues for the
year ended December 31, 2010. We believe the geographic
diversity of our markets and the scope of our inpatient and
outpatient operations help reduce volatility in our operating
results.
Scale and Infrastructure Drive Cost Savings and
Efficiencies. Our scale allows us to leverage our
support infrastructure to achieve significant cost savings and
operating efficiencies, thereby driving margin expansion. We
strategically manage our supply chain through centralized
purchasing and supply warehouses, as well as our revenue cycle
through centralized billing, collections and health information
management functions. We also manage the provision of
information technology through a combination of centralized
systems with regional service support as well as centralize many
other clinical and corporate
S-4
functions, creating economies of scale in managing expenses and
business processes. In addition to the cost savings and
operating efficiencies, this support infrastructure
simultaneously generates revenue from third parties that utilize
our services.
Well-Capitalized Portfolio of High Quality
Assets. In order to expand the range and improve the
quality of services provided at our facilities, we invested over
$7.5 billion in our facilities and information technology
systems over the five-year period ended March 31, 2011. We
believe our significant capital investments in these areas will
continue to attract new and returning patients, attract and
retain high-quality physicians, maximize cost efficiencies and
address the health care needs of our local communities.
Furthermore, we believe our platform, as well as electronic
health record infrastructure, national research and physician
management capabilities, provide a strategic advantage by
enhancing our ability to capitalize on anticipated incentives
through the Health Information Technology for Economic and
Clinical Health Act (HITECH) provisions of the
American Recovery and Reinvestment Act of 2009
(ARRA) and position us well in an environment that
increasingly emphasizes quality, transparency and coordination
of care.
Strong Operating Results and Cash Flows. Our leading
scale, diversification, favorable market positions, dedication
to clinical quality and focus on operational efficiency have
enabled us to achieve attractive historical financial
performance even during the most recent economic period. In the
three months ended March 31, 2011, we generated net income
attributable to HCA Holdings, Inc. of $240 million,
Adjusted EBITDA of $1.590 billion and cash flows from
operating activities of $918 million. Our ability to
generate strong and consistent cash flow from operations has
enabled us to invest in our operations, reduce our debt, enhance
earnings per share and continue to pursue attractive growth
opportunities.
Proven and Experienced Management Team. We believe
the extensive experience and depth of our management team are a
distinct competitive advantage in the complicated and evolving
industry in which we compete. Our CEO and Chairman of the Board
of Directors, Richard M. Bracken, began his career with our
company over 29 years ago and has held various executive
positions with us over that period, including, most recently, as
our President and Chief Operating Officer. Our President, Chief
Financial Officer and Director, R. Milton Johnson, joined our
company over 28 years ago and has held various positions in
our financial operations since that time. Our Group Presidents
average approximately 20 years of experience with our
company. Members of our senior management hold significant
equity interests in our company, further aligning their
long-term interests with those of our stockholders.
Our growth
strategy
We are committed to providing the communities we serve with high
quality, cost-effective health care while growing our business,
increasing our profitability and creating long-term value for
our stockholders. To achieve these objectives, we align our
efforts around the following growth agenda:
Grow Our Presence in Existing Markets. We believe we
are well positioned in a number of large and growing markets
that will allow us the opportunity to generate long-term,
attractive growth through the expansion of our presence in these
markets. We plan to continue recruiting and strategically
collaborating with the physician community and adding attractive
service lines such as cardiology, emergency services, oncology
and womens
S-5
services. Additional components of our growth strategy include
expanding our footprint through developing various outpatient
access points, including surgery centers, rural outreach,
freestanding emergency departments and walk-in clinics. We have
invested significant capital into these markets and expect to
continue to see the benefit of this investment.
Achieve Industry-Leading Performance in Clinical and
Satisfaction Measures. Achieving high levels of patient
safety, patient satisfaction and clinical quality are central
goals of our business model. To achieve these goals, we have
implemented a number of initiatives including infection
reduction initiatives, hospitalist programs, advanced health
information technology and evidence-based medicine programs. We
routinely analyze operational practices from our best-performing
hospitals to identify ways to implement organization-wide
performance improvements and reduce clinical variation. We
believe these initiatives will continue to improve patient care,
help us achieve cost efficiencies, grow our revenues and
favorably position us in an environment where our constituents
are increasingly focused on quality, efficacy and efficiency.
Recruit and Employ Physicians to Meet Need for High Quality
Health Services. We depend on the quality and
dedication of the health care providers and other team members
who serve at our facilities. We believe a critical component of
our growth strategy is our ability to successfully recruit and
strategically collaborate with physicians and other
professionals to provide high quality care. We attract and
retain physicians by providing high quality, convenient
facilities with advanced technology, by expanding our specialty
services and by building our outpatient operations. We believe
our continued investment in the employment, recruitment and
retention of physicians will improve the quality of care at our
facilities.
Continue to Leverage Our Scale and Market Positions to
Enhance Profitability. We believe there is significant
opportunity to continue to grow the profitability of our company
by fully leveraging the scale and scope of our franchise. We are
currently pursuing next generation performance improvement
initiatives such as contracting for services on a multistate
basis and expanding our support infrastructure for additional
clinical and support functions, such as physician credentialing,
medical transcription and electronic medical recordkeeping. We
believe our centrally managed business processes and ability to
leverage cost-saving practices across our extensive network will
enable us to continue to manage costs effectively. We have
created a subsidiary, Parallon Business Solutions, to leverage
key components of our support infrastructure, including revenue
cycle management, health care group purchasing, supply chain
management and staffing functions, by offering these services to
other hospital companies.
Selectively Pursue a Disciplined Development
Strategy. We continue to believe there are significant
growth opportunities in our markets. We will continue to provide
financial and operational resources to successfully execute on
our in-market opportunities. To complement our in-market growth
agenda, we intend to focus on selectively developing and
acquiring new hospitals, outpatient facilities and other health
care service providers. We believe the challenges faced by the
hospital industry may spur consolidation and we believe our
size, scale, national presence and access to capital will
position us well to participate in any such consolidation. We
have a strong record of successfully acquiring and integrating
hospitals and entering into joint ventures and intend to
continue leveraging this experience.
S-6
Recent
developments
On July 25, 2011, we announced our results of operations
for the quarter ended June 30, 2011. For further
information regarding these results, see Recent
developments.
During the second quarter of 2011, we completed the acquisition
of Mercy Hospital in Coral Gables, Florida, and on June 15,
2011, we announced that we had entered into a non-binding
Memorandum of Understanding with the Colorado Health Foundation
for the purchase of the Foundations remaining ownership
interest in the HCA-HealthONE LLC joint venture for
$1.45 billion. Subject to regulatory review and negotiation
of a definitive agreement, the transaction is expected to close
in the third quarter of 2011. We intend to fund the purchase
price at the closing of the acquisition through amounts
available under our revolving credit facility and do not
anticipate it will have a material impact to our leverage ratio.
In June 2011, HCA Inc. redeemed all of its $1.000 billion
aggregate principal amount of
91/8%
second lien notes due 2014 and $108.5 million aggregate
principal amount of its
97/8%
second lien notes due 2017 (the June redemptions).
On May 4, 2011, we amended our senior secured credit
facilities to, among other things, and subject to compliance
with certain covenants and restrictions: (i) permit HCA
Inc. and its restricted subsidiaries to issue new unsecured and
second lien notes, (ii) allow HCA Inc. and its restricted
subsidiaries to issue new first lien notes and first lien term
loans, (iii) revise the change of control definition and
(iv) with respect to certain of the senior secured credit
facilities, extend the maturity date. See Description of
other indebtednessSenior secured credit facilities.
Corporate
reorganization
On November 22, 2010, HCA Inc. reorganized by creating a
new holding company structure (the Corporate
Reorganization), pursuant to which HCA Holdings, Inc.
became our new parent company, and HCA Inc. became HCA Holdings,
Inc.s wholly-owned direct subsidiary. As part of the
Corporate Reorganization, HCA Inc.s outstanding shares of
capital stock were automatically converted, on a share for share
basis, into identical shares of HCA Holdings, Inc.s common
stock, and HCA Holdings, Inc. became a guarantor but did not
assume the debt of HCA Inc.s outstanding secured
notes. See Description of other indebtedness.
Through our predecessors, we commenced operations in 1968. HCA
Inc. was incorporated in Nevada in January 1990 and
reincorporated in Delaware in September 1993. Our principal
executive offices are located at One Park Plaza, Nashville,
Tennessee 37201, and our telephone number is
(615) 344-9551.
S-7
Corporate
structure
The indebtedness figures in the diagram below are as of
March 31, 2011 and give effect to the June redemptions and
the indebtedness incurred under the notes offered hereby and the
use of proceeds therefrom. In this prospectus supplement, where
we have presented information as adjusted to give effect to the
use of the net proceeds of this offering, we have assumed that
the notes will not be offered at a discount. If the notes are
offered at a discount, the net proceeds to us will be less than
we have assumed.
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(1)
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In connection with the Corporate
Reorganization, HCA Holdings, Inc. became a guarantor of all of
HCA Inc.s then-outstanding secured notes but is not
subject to the covenants that apply to HCA Inc. or HCA
Inc.s restricted subsidiaries under those notes.
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(2)
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Consists of (i) a
$2.000 billion asset-based revolving credit facility
maturing on November 16, 2012 (the asset-based
revolving credit facility) ($1.450 billion
outstanding at March 31, 2011 as adjusted to give effect to
the June redemptions and the notes offered hereby); (ii) a
$2.000 billion senior secured revolving credit facility
maturing on November 17, 2015 (the senior secured
revolving credit facility) (none outstanding at
March 31, 2011, without giving effect to outstanding
letters of credit); (iii) a $487 million senior
secured term loan
A-1 facility
maturing on November 17, 2012; (iv) a
$594 million senior secured term loan
A-2 facility
maturing on May 2, 2016; (v) a $1.689 billion
senior secured term loan B-1 facility maturing on
November 17, 2013; (vi) a $2.000 billion senior
secured term loan B-2 facility maturing on March 31, 2017;
(vii) a $2.373 billion senior secured term loan B-3
facility maturing on May 1, 2018; and (viii) a
291 million, or $411 million-equivalent, senior
secured European term loan facility maturing on
November 17, 2013. We refer to the facilities described
under (ii) through (viii) above, collectively, as the
cash flow credit facility and, together with the
asset-based revolving credit facility, the senior secured
credit facilities. Does not give effect to amounts that
may be drawn under the revolving credit facility to fund our
acquisition of HCA-HealthONE LLC, if consummated. See
SummaryRecent developments.
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(3)
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Consists of
(i) $1.500 billion aggregate principal amount of
81/2%
first lien notes due 2019 that HCA Inc. issued in April 2009
(the April 2009 first lien notes);
(ii) $1.250 billion aggregate principal amount of
77/8%
first lien notes due 2020 that HCA Inc. issued in August
2009 (the August 2009 first lien notes),
(iii) $1.400 billion aggregate principal amount of
71/4%
first lien notes due 2020 that HCA Inc. issued in March 2010
(the March 2010 first lien notes and, collectively
with the April 2009 first lien notes and the August 2009 first
lien notes, the first lien notes) and
(iv) $74 million of unamortized debt discounts that
reduce the existing indebtedness.
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(4)
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Consists of (i) $3.200 billion
aggregate principal amount of
91/4%
second lien notes due 2016 (all of which are intended to be
redeemed with the net proceeds from this offering),
(ii) $1.578 billion of
95/8%/103/8%
second lien toggle notes due 2016 (all of which are intended to
be redeemed with the net proceeds from this offering),
(iii) $310 million aggregate principal amount of
97/8%
second lien notes due 2017 ($108.5 million of which were
redeemed in the June redemptions), and (iv) $6 million
of unamortized debt discounts that reduce the existing
indebtedness. We refer to the notes issued in (i) through
(iii) above, collectively as the second lien
notes and, together with the first lien notes, the
existing secured notes.
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(5)
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Consists of (i) an aggregate
principal amount of $246 million medium-term notes with
maturities ranging from 2014 to 2025 and a weighted average
interest rate of 8.28%; (ii) an aggregate principal amount
of $886 million debentures with maturities ranging from
2015 to 2095 and a weighted average interest rate of 7.55%;
(iii) an aggregate principal amount of $4.694 billion
senior notes with maturities ranging from 2012 to 2033 and a
weighted average interest rate of 6.54%;
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S-8
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(iv) $314 million of
secured debt, which represents capital leases and other secured
debt with a weighted average interest rate of 7.12%; and
(v) $9 million of unamortized debt discounts that
reduce the existing indebtedness. For more information regarding
our unsecured and other indebtedness, see Description of
other indebtedness.
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(6)
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The cash flow credit facility and
the first lien notes are secured by first-priority liens, and
the second lien notes and related guarantees are secured by
second-priority liens, on substantially all the capital stock of
Healthtrust, Inc. The Hospital Company and the first-tier
subsidiaries of the subsidiary guarantors (but limited to 65% of
the voting stock of any such first-tier subsidiary that is a
foreign subsidiary), subject to certain exceptions.
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(7)
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Includes subsidiaries which are
designated as restricted subsidiaries under HCA
Inc.s indenture dated as of December 16, 1993,
certain of their wholly owned subsidiaries formed in connection
with the asset-based revolving credit facility and certain
excluded subsidiaries (non-material subsidiaries).
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S-9
The
offering
The summary below describes the principal terms of the notes.
Certain of the terms and conditions described below are subject
to important limitations and exceptions. The Description
of the secured notes and Description of the
unsecured notes sections of this prospectus supplement and
the Description of Debt Securities and Guarantees in
the accompanying prospectus contains more detailed descriptions
of the terms and conditions of the notes.
Terms of the
secured notes
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Issuer |
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HCA Inc. |
|
Secured Notes |
|
6.50% senior secured notes due 2020. |
|
Maturity Date |
|
The secured notes will mature on February 15, 2020. |
|
Interest Rate |
|
Interest on the secured notes will be payable in cash and will
accrue at a rate of 6.50% per annum. |
|
Interest Payment Dates |
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February 15 and August 15, commencing on
February 15, 2012. Interest will accrue from August 1,
2011. |
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Ranking |
|
The secured notes will be the Issuers senior obligations
and will: |
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rank
senior in right of payment to any of its future subordinated
indebtedness;
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rank
equally in right of payment with any of its existing and future
senior indebtedness;
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be
effectively senior in right of payment to indebtedness under the
second lien notes to the extent of the collateral securing such
indebtedness and to any unsecured indebtedness;
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be
effectively equal in right of payment with indebtedness under
the cash flow credit facility and the first lien notes to the
extent of the collateral (other than certain European collateral
securing the senior secured European term loan facility)
securing such indebtedness;
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be
effectively subordinated in right of payment to all indebtedness
under the asset-based revolving credit facility to the extent of
the shared collateral securing such indebtedness; and
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be
effectively subordinated in right of payment to all existing and
future indebtedness and other liabilities of our non-guarantor
subsidiaries (other than indebtedness and liabilities owed to us
or one of our guarantor subsidiaries).
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As of March 31, 2011, on an as adjusted basis after giving
effect to the June redemptions and the notes offered hereby and
the use of proceeds therefrom as described under Use of
proceeds: |
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the
secured notes and related guarantees would have been effectively
senior in right of payment to $202 million of second lien
notes, effectively equal in right of payment to approximately
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S-10
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$7.143 billion
of senior secured indebtedness under the cash flow credit
facility (other than our senior secured European term loan
facility), $4.150 billion of first lien notes and
approximately $133 million of other secured debt, and
effectively junior in right in payment to $1.450 billion of
indebtedness under the asset-based revolving credit facility, in
each case to the extent of the collateral securing such
indebtedness; |
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the
secured notes and related guarantees would have been effectively
subordinated in right of payment to approximately
$411 million equivalent outstanding under the senior
secured European term loan facility and $181 million of
other secured debt of our non-guarantor subsidiaries, which
primarily represents capital leases; and
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we
would have had an additional $1.917 billion of unutilized
capacity under the senior secured revolving credit facility and
$550 million of unutilized capacity under the asset-based
revolving credit facility, subject to borrowing base limitations.
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Guarantees |
|
The secured notes will be fully and unconditionally guaranteed
on a senior unsecured basis by HCA Holdings, Inc. and on a
senior secured basis by each of our existing and future direct
or indirect wholly owned domestic subsidiaries that guarantees
our obligations under our senior secured credit facilities
(except for certain special purpose subsidiaries that will only
guarantee and pledge their assets under our asset-based
revolving credit facility). |
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Ranking of the Secured Notes Guarantees |
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Each subsidiary guarantee of the secured notes will: |
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rank
senior in right of payment to all existing and future
subordinated indebtedness of the guarantor subsidiary;
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rank
equally in right of payment with all existing and future senior
indebtedness of the guarantor subsidiary;
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be
effectively senior in right of payment to the guarantees of the
second lien notes to the extent of the guarantor
subsidiarys collateral securing such indebtedness and to
any guarantees of unsecured indebtedness;
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be
effectively equal in right of payment with the guarantees of the
cash flow credit facility and the first lien notes to the extent
of the subsidiary guarantors collateral (other than
certain European collateral securing the senior secured European
term loan facility) securing such indebtedness;
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be
effectively subordinated in right of payment to the guarantees
of the asset-based revolving credit facility to the extent of
the guarantor subsidiarys collateral securing such
indebtedness; and
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be
effectively subordinated in right of payment to all existing and
future indebtedness and other liabilities of our non-guarantor
subsidiaries (other than indebtedness and liabilities owed to us
or one of our guarantor subsidiaries).
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S-11
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Any subsidiary guarantee of the secured notes will be released
in the event such guarantee is released under the senior secured
credit facilities. |
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As of March 31, 2011, on an as adjusted basis after giving
effect to the June redemptions and the notes offered hereby and
the use of proceeds therefrom, our non-guarantor subsidiaries
would have accounted for approximately $3.477 billion, or
43.2%, of our total revenue, and approximately
$689 million, or 43.3%, of our total Adjusted EBITDA, and
approximately $9.840 billion, or 41.3%, of our total
assets, and approximately $5.969 billion, or 18.9%, of our
total liabilities. |
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Security |
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The secured notes and related subsidiary guarantees will be
secured by first-priority liens, subject to permitted liens, on
certain of the assets of HCA Inc. and the subsidiary guarantors
that secure our cash flow credit facility and the first lien
notes on a pari passu basis, including: |
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substantially
all the capital stock of any wholly owned first-tier subsidiary
of HCA Inc. or of any subsidiary guarantor of the notes (but
limited to 65% of the voting stock of any such wholly owned
first-tier subsidiary that is a foreign subsidiary); and
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substantially
all tangible and intangible assets of our company and each
subsidiary guarantor, other than (1) other properties that
do not secure our senior secured credit facilities,
(2) deposit accounts, other bank or securities accounts and
cash, (3) leaseholds and motor vehicles; provided that,
with respect to the portion of the collateral comprised of real
property, we will have up to 60 days following the issue
date of the notes to complete those actions required to perfect
the first-priority lien on such collateral, (4) certain
European collateral and (5) certain receivables collateral
that only secures our asset-based revolving credit facility, in
each case subject to exceptions, and except that the lien on
properties defined as principal properties under our
existing indenture dated as of December 16, 1993, so long
as such indenture remains in effect, will be limited to securing
a portion of the indebtedness under the notes, our cash flow
credit facility and the first lien notes that, in the aggregate,
does not exceed 10% of our consolidated net tangible assets.
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The secured notes and the related subsidiary guarantees will be
secured by second-priority liens, subject to permitted liens, on
certain receivables of HCA Inc. and the subsidiary guarantors
that secure our asset-based revolving credit facility on a
first-priority basis. See Description of the secured
notesSecurity. |
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In the event the notes have investment grade ratings from both
Moodys Investors Service, Inc. and Standard &
Poors. the collateral securing the secured notes and the
related subsidiary guarantees will be released. In addition, to
the extent the collateral is released as security for the senior
secured credit facilities, it will also be released as security
for the secured notes offered hereby and the |
S-12
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related subsidiary guarantees. See Description of the
secured notesSecurityCovenant termination and
release of collateral. |
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Covenants |
|
The indenture governing the secured notes will contain covenants
limiting the Issuers and certain of its subsidiaries
ability to: |
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create
liens on certain assets to secure debt;
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engage
in certain sale and lease-back transactions;
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sell
certain assets; and
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consolidate,
merge, sell or otherwise dispose of all or substantially all of
its assets.
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These covenants are subject to a number of important limitations
and exceptions. See Description of the secured notes. |
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These covenants will cease to apply in the event that either
(i) the secured notes have investment grade ratings from
both Moodys Investors Service, Inc. and
Standard & Poors or (ii) the collateral is
released as security for the senior secured credit facilities,
and instead, the covenants described below under Terms of
the senior unsecured notesCovenants will apply to
the notes. See Description of the secured
notesSecurityCovenant termination and release of
collateral. |
Terms of the
senior unsecured notes
|
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Issuer |
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HCA Inc. |
|
Senior Unsecured Notes |
|
7.50% senior unsecured notes due 2022. |
|
Maturity Date |
|
The unsecured notes will mature on February 15, 2022. |
|
Interest Rate |
|
Interest on the unsecured notes will be payable in cash and will
accrue at a rate of 7.50% per annum. |
|
Interest Payment Dates |
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February 15 and August 15, commencing on
February 15, 2012. Interest will accrue from August 1,
2011. |
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Ranking |
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The unsecured notes will be the Issuers senior obligations
and will: |
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rank
senior in right of payment to any of its future subordinated
indebtedness;
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rank
equally in right of payment with any of its existing and future
senior indebtedness;
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be
effectively subordinated in right of payment to any of its
existing and future secured indebtedness to the extent of the
value of the collateral securing such indebtedness; and
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be
structurally subordinated in right of payment to all existing
and future indebtedness and other liabilities of its
subsidiaries.
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S-13
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As of March 31, 2011, on an as adjusted basis after giving
effect to the June redemptions and the notes offered hereby and
the use of proceeds therefrom as described under Use of
proceeds: |
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the
unsecured notes would have been effectively subordinated in
right of payment to $16.670 billion of secured
indebtedness; and
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we
would have had $1.917 billion of unutilized capacity under
the senior secured revolving credit facility and
$550 million of unutilized capacity under the asset-based
revolving credit facility, after giving effect to letters of
credit and borrowing base limitations, all of which would be
structurally senior to the notes offered hereby if borrowed.
|
|
Guarantees |
|
The unsecured notes will be fully and unconditionally guaranteed
on a senior unsecured basis by HCA Holdings, Inc. and will: |
|
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rank
senior in right of payment to all existing and future
subordinated indebtedness of HCA Holdings, Inc.;
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rank
equally in right of payment with all existing and future senior
indebtedness of HCA Holdings, Inc.;
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be
effectively subordinated in right of payment to all future
secured indebtedness of HCA Holdings, Inc. to the extent of the
value of the collateral securing such indebtedness; and
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be
effectively subordinated in right of payment to all existing and
future indebtedness and other liabilities of any subsidiary of
HCA Holdings, Inc. (other than HCA Inc.).
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The unsecured notes will not be guaranteed by any of HCA
Inc.s subsidiaries. |
|
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|
As of March 31, 2011, on an as adjusted basis after giving
effect to the June redemptions and the notes offered hereby and
the use of proceeds therefrom as described under Use of
proceeds, the unsecured notes and related guarantee would
have been structurally subordinated to $22.496 billion of
indebtedness of HCA Inc.s subsidiaries,
$16.670 billion of which would have been secured. |
|
Covenants |
|
The indenture governing the unsecured notes will contain
covenants limiting the Issuers and certain of its
subsidiaries ability to: |
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|
create
liens on certain assets to secure debt;
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engage
in certain sale and lease-back transactions; and
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consolidate,
merge, sell or otherwise dispose of all or substantially all of
its assets.
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These covenants are subject to a number of important limitations
and exceptions. See Description of the unsecured
notes. |
S-14
Terms common
to the secured notes and the senior unsecured
notes
|
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|
Optional Redemption |
|
The Issuer may redeem the notes, at any time in whole or from
time to time in part, at the redemption prices described in this
prospectus supplement. See Description of the secured
notesOptional redemption and Description of
the unsecured notesOptional redemption. |
|
Change of Control Offer |
|
Upon the occurrence of a change of control, you will have the
right, as holders of the notes, to require the Issuer to
repurchase some or all of your notes at 101% of their face
amount, plus accrued and unpaid interest to the repurchase date.
See Description of the secured notesRepurchase at
the option of holdersChange of control and
Description of the unsecured notesRepurchase at the
option of holdersChange of control. |
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|
The Issuer may not be able to pay you the required price for
notes you present to it at the time of a change of control,
because: |
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|
the Issuer may not have enough funds at that time; or
|
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|
the terms of our indebtedness under the senior
secured credit facilities may prevent it from making such
payment.
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Your right to require the Issuer to repurchase the notes upon
the occurrence of a change of control will cease to apply to the
notes at all times during which such notes have investment grade
ratings from both Moodys Investors Service, Inc. and
Standard & Poors. See Description of the
secured notesCertain covenantsCovenant
suspension and Description of the unsecured
notesCertain covenantsCovenant suspension. |
|
No Prior Market |
|
The notes will be new securities for which there is currently no
market. Although the underwriters have informed the Issuer that
they intend to make a market in the notes and they are not
obligated to do so, and they may discontinue market making
activities at any time without notice. Accordingly, the Issuer
cannot assure you that a liquid market for the notes will
develop or be maintained. |
|
Use of Proceeds |
|
We estimate that our net proceeds from this offering, after
deducting underwriter discounts and commissions and estimated
offering expenses, will be approximately $4.939 billion. |
|
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We intend to use the net proceeds from the notes offered hereby,
together with $284 million of borrowings on our
asset-based
revolving credit facility, to redeem and repurchase all of (i)
our outstanding $1.578 billion
95/8%/103/8%
second lien toggle notes due 2016, (ii) our outstanding
$3.200 billion
91/4%
second lien notes due 2016 and (iii) for related fees and
expenses. See Use of proceeds and
Capitalization. |
|
Conflicts of Interest |
|
Certain of the underwriters and their respective affiliates
have, from time to time, performed, and may in the future
perform, various financial advisory, investment banking,
commercial banking and other services for us for which they
received or will receive customary |
S-15
|
|
|
|
|
fees and expenses. In addition, certain of the underwriters
and/or their
affiliates may be holders of our
95/8%/103/8%
second lien toggle notes due 2016 and/or our
91/4%
second lien notes due 2016 and, accordingly, they may receive a
portion of the net proceeds of this offering in connection with
the redemption of those notes. However, none of the
underwriters, nor any of their affiliates will receive net
proceeds of this offering equal to or in excess of 5% of the net
proceeds of this offering. |
|
|
|
Merrill Lynch, Pierce, Fenner & Smith Incorporated
and/or its affiliates indirectly own in excess of 10% of our
issued and outstanding common stock, and is therefore deemed to
be one of our affiliates and have a conflict
of interest within the meaning of the provisions of
Rule 5121 of the Financial Industry Regulatory Authority,
Inc. Conduct Rules (FINRA Rule 5121).
Accordingly, this offering is being conducted in accordance with
FINRA Rule 5121 regarding the underwriting of securities.
FINRA Rule 5121 requires that a qualified independent
underwriter as defined by the FINRA rules participate in
the preparation of the registration statement of which this
prospectus forms a part and perform its usual standard of due
diligence with respect thereto. Barclays Capital Inc. has agreed
to serve as the qualified independent underwriter for the
offering. See Underwriting (conflicts of interest). |
Risk
Factors
You should consider carefully all of the information set forth
and incorporated by reference in this prospectus supplement and,
in particular, should evaluate the specific factors set forth
and incorporated by reference in the section entitled Risk
factors for an explanation of certain risks of investing
in the notes, including risks related to our industry and
business.
S-16
Summary financial
data
The following table sets forth our summary financial data as of
and for the periods indicated. The financial data as of
December 31, 2010 and 2009 and for the years ended
December 31, 2010, 2009 and 2008 have been derived from our
consolidated financial statements incorporated by reference into
this prospectus supplement, which have been audited by
Ernst & Young LLP. The financial data as of
December 31, 2008 have been derived from our consolidated
financial statements audited by Ernst & Young LLP that
are not included or incorporated by reference herein.
The summary financial data as of March 31, 2011 and for the
three months ended March 31, 2011 and 2010 have been
derived from our unaudited condensed consolidated financial
statements incorporated by reference in this prospectus
supplement. The summary financial data as of March 31, 2010
have been derived from our unaudited condensed consolidated
financial statements that are not included or incorporated by
reference herein. The unaudited financial data presented have
been prepared on a basis consistent with our audited
consolidated financial statements. In the opinion of management,
such unaudited financial data reflect all adjustments,
consisting only of normal and recurring adjustments, necessary
for a fair presentation of the results for those periods. The
results of operations for the interim periods are not
necessarily indicative of the results to be expected for the
full year or any future period.
The summary financial data should be read in conjunction with
Selected Financial Data, Managements
Discussion and Analysis of Financial Condition and Results of
Operations, our consolidated financial statements and the
related notes thereto and our unaudited condensed consolidated
financial statements and the related notes thereto incorporated
by reference into this prospectus supplement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
Years ended December 31,
|
|
|
March 31,
|
|
(dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
30,683
|
|
|
$
|
30,052
|
|
|
$
|
28,374
|
|
|
$
|
8,055
|
|
|
$
|
7,544
|
|
Salaries and benefits
|
|
|
12,484
|
|
|
|
11,958
|
|
|
|
11,440
|
|
|
|
3,295
|
|
|
|
3,072
|
|
Supplies
|
|
|
4,961
|
|
|
|
4,868
|
|
|
|
4,620
|
|
|
|
1,275
|
|
|
|
1,200
|
|
Other operating expenses
|
|
|
5,004
|
|
|
|
4,724
|
|
|
|
4,554
|
|
|
|
1,322
|
|
|
|
1,202
|
|
Provision for doubtful accounts
|
|
|
2,648
|
|
|
|
3,276
|
|
|
|
3,409
|
|
|
|
649
|
|
|
|
564
|
|
Equity in earnings of affiliates
|
|
|
(282
|
)
|
|
|
(246
|
)
|
|
|
(223
|
)
|
|
|
(76
|
)
|
|
|
(68
|
)
|
Depreciation and amortization
|
|
|
1,421
|
|
|
|
1,425
|
|
|
|
1,416
|
|
|
|
358
|
|
|
|
355
|
|
Interest expense
|
|
|
2,097
|
|
|
|
1,987
|
|
|
|
2,021
|
|
|
|
533
|
|
|
|
516
|
|
Losses (gains) on sales of facilities
|
|
|
(4
|
)
|
|
|
15
|
|
|
|
(97
|
)
|
|
|
1
|
|
|
|
|
|
Impairments of long-lived assets
|
|
|
123
|
|
|
|
43
|
|
|
|
64
|
|
|
|
|
|
|
|
18
|
|
Termination of management agreement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,452
|
|
|
|
28,050
|
|
|
|
27,204
|
|
|
|
7,538
|
|
|
|
6,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
2,231
|
|
|
|
2,002
|
|
|
|
1,170
|
|
|
|
517
|
|
|
|
685
|
|
Provision for income taxes
|
|
|
658
|
|
|
|
627
|
|
|
|
268
|
|
|
|
183
|
|
|
|
209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
1,573
|
|
|
|
1,375
|
|
|
|
902
|
|
|
|
334
|
|
|
|
476
|
|
Net income attributable to noncontrolling interests
|
|
|
366
|
|
|
|
321
|
|
|
|
229
|
|
|
|
94
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Holdings, Inc.
|
|
$
|
1,207
|
|
|
$
|
1,054
|
|
|
$
|
673
|
|
|
$
|
240
|
|
|
$
|
388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
Years ended December 31,
|
|
|
March 31,
|
|
(dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
Statement of Cash Flows Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by operating activities
|
|
$
|
3,085
|
|
|
$
|
2,747
|
|
|
$
|
1,990
|
|
|
$
|
918
|
|
|
$
|
859
|
|
Cash flows used in investing activities
|
|
|
(1,039
|
)
|
|
|
(1,035
|
)
|
|
|
(1,467
|
)
|
|
|
(273
|
)
|
|
|
(181
|
)
|
Cash flows used in financing activities
|
|
|
(1,947
|
)
|
|
|
(1,865
|
)
|
|
|
(451
|
)
|
|
|
(503
|
)
|
|
|
(602
|
)
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1)
|
|
$
|
5,383
|
|
|
$
|
5,093
|
|
|
$
|
4,378
|
|
|
$
|
1,314
|
|
|
$
|
1,468
|
|
Adjusted
EBITDA(1)
|
|
|
5,868
|
|
|
|
5,472
|
|
|
|
4,574
|
|
|
|
1,590
|
|
|
|
1,574
|
|
Capital expenditures
|
|
|
1,325
|
|
|
|
1,317
|
|
|
|
1,600
|
|
|
|
329
|
|
|
|
214
|
|
Operating
Data:(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of hospitals at end of
period(3)
|
|
|
156
|
|
|
|
155
|
|
|
|
158
|
|
|
|
156
|
|
|
|
154
|
|
Number of freestanding outpatient surgical centers at end of
period(4)
|
|
|
97
|
|
|
|
97
|
|
|
|
97
|
|
|
|
98
|
|
|
|
98
|
|
Number of licensed beds at end of
period(5)
|
|
|
38,827
|
|
|
|
38,839
|
|
|
|
38,504
|
|
|
|
39,075
|
|
|
|
38,719
|
|
Weighted average licensed
beds(6)
|
|
|
38,655
|
|
|
|
38,825
|
|
|
|
38,422
|
|
|
|
39,061
|
|
|
|
38,687
|
|
Admissions(7)
|
|
|
1,554,400
|
|
|
|
1,556,500
|
|
|
|
1,541,800
|
|
|
|
406,900
|
|
|
|
398,900
|
|
Equivalent
admissions(8)
|
|
|
2,468,400
|
|
|
|
2,439,000
|
|
|
|
2,363,600
|
|
|
|
638,400
|
|
|
|
615,500
|
|
Average length of stay
(days)(9)
|
|
|
4.8
|
|
|
|
4.8
|
|
|
|
4.9
|
|
|
|
4.9
|
|
|
|
4.9
|
|
Average daily
census(10)
|
|
|
20,523
|
|
|
|
20,650
|
|
|
|
20,795
|
|
|
|
22,002
|
|
|
|
21,696
|
|
Occupancy(11)
|
|
|
53
|
%
|
|
|
53
|
%
|
|
|
54
|
%
|
|
|
56
|
%
|
|
|
56
|
%
|
Emergency room
visits(12)
|
|
|
5,706,200
|
|
|
|
5,593,500
|
|
|
|
5,246,400
|
|
|
|
1,527,600
|
|
|
|
1,367,100
|
|
Outpatient
surgeries(13)
|
|
|
783,600
|
|
|
|
794,600
|
|
|
|
797,400
|
|
|
|
193,000
|
|
|
|
190,700
|
|
Inpatient
surgeries(14)
|
|
|
487,100
|
|
|
|
494,500
|
|
|
|
493,100
|
|
|
|
119,700
|
|
|
|
122,500
|
|
Days revenues in accounts
receivable(15)
|
|
|
46
|
|
|
|
45
|
|
|
|
49
|
|
|
|
45
|
|
|
|
46
|
|
Gross patient
revenues(16)
|
|
$
|
125,640
|
|
|
$
|
115,682
|
|
|
$
|
102,843
|
|
|
$
|
34,764
|
|
|
$
|
31,054
|
|
Outpatient revenues as a percentage of patient
revenues(17)
|
|
|
38
|
%
|
|
|
38
|
%
|
|
|
37
|
%
|
|
|
38
|
%
|
|
|
36
|
%
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working
capital(18)
|
|
$
|
2,650
|
|
|
$
|
2,264
|
|
|
$
|
2,391
|
|
|
$
|
2,719
|
|
|
$
|
2,167
|
|
Property, plant and equipment, net
|
|
|
11,352
|
|
|
|
11,427
|
|
|
|
11,529
|
|
|
|
11,347
|
|
|
|
11,252
|
|
Cash and cash equivalents
|
|
|
411
|
|
|
|
312
|
|
|
|
465
|
|
|
|
553
|
|
|
|
388
|
|
Total assets
|
|
|
23,852
|
|
|
|
24,131
|
|
|
|
24,280
|
|
|
|
23,809
|
|
|
|
24,091
|
|
Total debt
|
|
|
28,225
|
|
|
|
25,670
|
|
|
|
26,989
|
|
|
|
25,366
|
|
|
|
26,855
|
|
Equity securities with contingent redemption rights
|
|
|
141
|
|
|
|
147
|
|
|
|
155
|
|
|
|
|
|
|
|
144
|
|
Stockholders deficit attributable to HCA Holdings,
Inc.
|
|
|
(11,926
|
)
|
|
|
(8,986
|
)
|
|
|
(10,255
|
)
|
|
|
(8,930
|
)
|
|
|
(10,313
|
)
|
Noncontrolling interests
|
|
|
1,132
|
|
|
|
1,008
|
|
|
|
995
|
|
|
|
1,142
|
|
|
|
1,015
|
|
Total stockholders deficit
|
|
|
(10,794
|
)
|
|
|
(7,978
|
)
|
|
|
(9,260
|
)
|
|
|
(7,788
|
)
|
|
|
(9,298
|
)
|
|
|
|
|
|
(1)
|
|
EBITDA, a measure used by
management to evaluate operating performance, is defined as net
income attributable to HCA Holdings, Inc. plus
(i) provision for income taxes, (ii) interest expense
and (iii) depreciation and amortization. EBITDA is not a
recognized term under GAAP and does not purport to be an
alternative to net income as a measure of operating performance
or to cash flows from operating activities as a measure of
liquidity. Additionally, EBITDA is not intended to be a
|
S-18
|
|
|
|
|
measure of free cash flow available
for managements discretionary use, as it does not consider
certain cash requirements such as interest payments, tax
payments and other debt service requirements. Management
believes EBITDA is helpful to investors and our management in
highlighting trends because EBITDA excludes the results of
decisions outside the control of operating management and that
can differ significantly from company to company depending on
long-term strategic decisions regarding capital structure, the
tax jurisdictions in which companies operate and capital
investments. Management compensates for the limitations of using
non-GAAP financial measures by using them to supplement GAAP
results to provide a more complete understanding of the factors
and trends affecting the business than GAAP results alone.
Because not all companies use identical calculations, our
presentation of EBITDA may not be comparable to similarly titled
measures of other companies.
|
|
|
|
Adjusted EBITDA is defined as
EBITDA, adjusted to exclude net income attributable to
noncontrolling interests, losses (gains) on sales of facilities,
impairments of long-lived assets and termination of management
agreement. We believe Adjusted EBITDA is an important measure
that supplements discussions and analysis of our results of
operations. We believe it is useful to investors to provide
disclosures of our results of operations on the same basis used
by management. Management relies upon Adjusted EBITDA as the
primary measure to review and assess operating performance of
its hospital facilities and their management teams. Adjusted
EBITDA target amounts are the performance measures utilized in
our annual incentive compensation programs and are vesting
conditions for a portion of our stock option grants. Management
and investors review both the overall performance (GAAP net
income attributable to HCA Holdings, Inc.) and operating
performance (Adjusted EBITDA) of our health care facilities.
Adjusted EBITDA and the Adjusted EBITDA margin (Adjusted EBITDA
divided by revenues) are utilized by management and investors to
compare our current operating results with the corresponding
periods during the previous year and to compare our operating
results with other companies in the health care industry. It is
reasonable to expect that losses (gains) on sales of facilities
and impairment of long-lived assets will occur in future
periods, but the amounts recognized can vary significantly from
period to period, do not directly relate to the ongoing
operations of our health care facilities and complicate period
comparisons of our results of operations and operations
comparisons with other health care companies. Adjusted EBITDA is
not a measure of financial performance under accounting
principles generally accepted in the United States, and should
not be considered an alternative to net income attributable to
HCA Holdings, Inc. as a measure of operating performance or cash
flows from operating, investing and financing activities as a
measure of liquidity. Because Adjusted EBITDA is not a
measurement determined in accordance with generally accepted
accounting principles and is susceptible to varying
calculations, Adjusted EBITDA, as presented, may not be
comparable to other similarly titled measures presented by other
companies. There may be additional adjustments to Adjusted
EBITDA under our agreements governing our material debt
obligations, including the notes offered hereby.
|
|
|
|
EBITDA and Adjusted EBITDA are
calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
Years ended December 31,
|
|
|
March 31,
|
|
(dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
Net income attributable to HCA Holdings, Inc.
|
|
$
|
1,207
|
|
|
$
|
1,054
|
|
|
$
|
673
|
|
|
$
|
240
|
|
|
$
|
388
|
|
Provision for income taxes
|
|
|
658
|
|
|
|
627
|
|
|
|
268
|
|
|
|
183
|
|
|
|
209
|
|
Interest expense
|
|
|
2,097
|
|
|
|
1,987
|
|
|
|
2,021
|
|
|
|
533
|
|
|
|
516
|
|
Depreciation and amortization
|
|
|
1,421
|
|
|
|
1,425
|
|
|
|
1,416
|
|
|
|
358
|
|
|
|
355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
5,383
|
|
|
|
5,093
|
|
|
|
4,378
|
|
|
|
1,314
|
|
|
|
1,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling
interests(i)
|
|
|
366
|
|
|
|
321
|
|
|
|
229
|
|
|
|
94
|
|
|
|
88
|
|
Losses (gains) on sales of
facilities(ii)
|
|
|
(4
|
)
|
|
|
15
|
|
|
|
(97
|
)
|
|
|
1
|
|
|
|
|
|
Impairments of long-lived
assets(iii)
|
|
|
123
|
|
|
|
43
|
|
|
|
64
|
|
|
|
|
|
|
|
18
|
|
Termination of management
agreement(iv)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
5,868
|
|
|
$
|
5,472
|
|
|
$
|
4,574
|
|
|
$
|
1,590
|
|
|
$
|
1,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
|
Represents the add-back of net
income attributable to noncontrolling interests.
|
|
(ii)
|
|
Represents the elimination of
losses (gains) on sales of facilities.
|
|
(iii)
|
|
Represents the add-back of
impairments of long-lived assets.
|
|
(iv)
|
|
Represents the add-back of
termination of management agreement.
|
|
|
|
(2)
|
|
The operating data set forth in
this table includes only those facilities that are consolidated
for financial reporting purposes.
|
|
(3)
|
|
Excludes facilities that are not
consolidated (accounted for using the equity method) for
financial reporting purposes.
|
|
(4)
|
|
Excludes facilities that are not
consolidated (accounted for using the equity method) for
financial reporting purposes.
|
|
(5)
|
|
Licensed beds are those beds for
which a facility has been granted approval to operate from the
applicable state licensing agency.
|
|
(6)
|
|
Represents the average number of
licensed beds, weighted based on periods owned.
|
|
(7)
|
|
Represents the total number of
patients admitted to our hospitals and is used by management and
certain investors as a general measure of inpatient volume.
|
|
(8)
|
|
Equivalent admissions are used by
management and certain investors as a general measure of
combined inpatient and outpatient volume. Equivalent admissions
are computed by multiplying admissions (inpatient volume) by the
sum of gross
|
S-19
|
|
|
|
|
inpatient revenues and gross
outpatient revenues and then dividing the resulting amount by
gross inpatient revenues. The equivalent admissions computation
equates outpatient revenues to the volume measure
(admissions) used to measure inpatient volume, resulting in a
general measure of combined inpatient and outpatient volume.
|
|
(9)
|
|
Represents the average number of
days admitted patients stay in our hospitals.
|
|
(10)
|
|
Represents the average number of
patients in our hospital beds each day.
|
|
(11)
|
|
Represents the percentage of
hospital licensed beds occupied by patients. Both average daily
census and occupancy rate provide measures of the utilization of
inpatient rooms.
|
|
(12)
|
|
Represents the number of patients
treated in our emergency rooms.
|
|
(13)
|
|
Represents the number of surgeries
performed on patients who were not admitted to our hospitals.
Pain management and endoscopy procedures are not included in
outpatient surgeries.
|
|
(14)
|
|
Represents the number of surgeries
performed on patients who have been admitted to our hospitals.
Pain management and endoscopy procedures are not included in
inpatient surgeries.
|
|
(15)
|
|
Revenues per day is calculated by
dividing the revenues for the period by the days in the period.
Days revenues in accounts receivable is then calculated as
accounts receivable, net of the allowance for doubtful accounts,
at the end of the period divided by revenues per day.
|
|
(16)
|
|
Gross patient revenues are based
upon our standard charge listing. Gross charges/revenues
typically do not reflect what our hospital facilities are paid.
Gross charges/revenues are reduced by contractual adjustments,
discounts and charity care to determine reported revenues.
|
|
(17)
|
|
Represents the percentage of
patient revenues related to patients who are not admitted to our
hospitals.
|
|
(18)
|
|
We define working capital as
current assets minus current liabilities.
|
S-20
Risk
factors
You should carefully consider the risk factors set forth
below as well as the other information contained or incorporated
by reference in this prospectus supplement before purchasing the
notes. This prospectus supplement contains forward-looking
statements that involve risk and uncertainties. Any of the
following risks could materially and adversely affect our
business, financial condition or results of operations.
Additional risks and uncertainties not currently known to us or
those we currently view to be immaterial may also materially and
adversely affect our business, financial condition or results of
operations. In such a case, you may lose all or part of your
original investment.
Risks related to
the notes
Our
substantial leverage could adversely affect our ability to raise
additional capital to fund our operations, limit our ability to
react to changes in the economy or our industry, expose us to
interest rate risk to the extent of our variable rate debt and
prevent us from meeting our obligations.
We are highly leveraged. As of March 31, 2011, on an as
adjusted basis after giving effect to the June redemptions, as
well as the notes offered hereby and the use of proceeds
therefrom, our total indebtedness would have been
$25.932 billion. As of March 31, 2011, on an as
adjusted basis after giving effect to the June redemptions as
well as notes offered hereby and the use of proceeds therefrom,
the Issuer would have had availability of $1.917 billion
under its senior secured revolving credit facility and
$550 million under its asset-based revolving credit
facility, after giving effect to letters of credit and borrowing
base limitations. Our high degree of leverage could have
important consequences, including:
|
|
|
increasing our vulnerability to downturns or adverse changes in
general economic, industry or competitive conditions and adverse
changes in government regulations;
|
|
|
requiring a substantial portion of cash flow from operations to
be dedicated to the payment of principal and interest on our
indebtedness, therefore reducing our ability to use our cash
flow to fund our operations, capital expenditures and future
business opportunities;
|
|
|
exposing us to the risk of increased interest rates as certain
of our unhedged borrowings are at variable rates of interest;
|
|
|
limiting our ability to make strategic acquisitions or causing
us to make nonstrategic divestitures;
|
|
|
limiting our ability to obtain additional financing for working
capital, capital expenditures, product or service line
development, debt service requirements, acquisitions and general
corporate or other purposes; and
|
|
|
limiting our ability to adjust to changing market conditions and
placing us at a competitive disadvantage compared to our
competitors who are less highly leveraged.
|
We and our subsidiaries have the ability to incur additional
indebtedness in the future, subject to the restrictions
contained in HCA Inc.s senior secured credit facilities
and the indentures governing HCA Holdings, Inc. and HCA
Inc.s outstanding notes and the indenture governing the
notes offered hereby. If new indebtedness is added to our
current debt levels, the related risks that we now face could
intensify.
S-21
We may not be
able to generate sufficient cash to service all of our
indebtedness and may not be able to refinance our indebtedness
on favorable terms. If we are unable to do so, we may be forced
to take other actions to satisfy our obligations under our
indebtedness, which may not be successful.
Our ability to make scheduled payments on or to refinance our
debt obligations depends on our financial condition and
operating performance, which are subject to prevailing economic
and competitive conditions and to certain financial, business
and other factors beyond our control. We cannot assure you we
will maintain a level of cash flows from operating activities
sufficient to permit us to pay the principal, premium, if any,
and interest on our indebtedness.
In addition, we conduct our operations through our subsidiaries.
Accordingly, repayment of our indebtedness is dependent on the
generation of cash flow by our subsidiaries and their ability to
make such cash available to us by dividend, debt repayment or
otherwise. Except for subsidiaries that are or become guarantors
of the notes, our subsidiaries will not have any obligation to
pay amounts due on the notes or our other indebtedness or to
make funds available for that purpose. Our subsidiaries may not
be able to, or may not be permitted to, make distributions to
enable us to make payments in respect of our indebtedness. The
agreements governing the current and future indebtedness of the
Issuers subsidiaries may not permit the Issuers
subsidiaries to provide the Issuer with sufficient dividends,
distributions or loans to fund scheduled interest and principal
payments on these notes when due. The terms of the senior
secured credit facilities and the indentures governing the
Issuers outstanding notes significantly restrict the
Issuers and its subsidiaries from paying dividends and
otherwise transferring assets to the Issuer. Each subsidiary is
a distinct legal entity, and, under certain circumstances, legal
and contractual restrictions may limit our ability to obtain
cash from our subsidiaries.
We may find it necessary or prudent to refinance our outstanding
indebtedness with longer-maturity debt at a higher interest
rate. In February, April and August of 2009 and, in March of
2010, for example, we issued $310 million in aggregate
principal amount of
97/8%
second lien notes due 2017, $1.500 billion in aggregate
principal amount of
81/2%
first lien notes due 2019, $1.250 billion in aggregate
principal amount of
77/8%
first lien notes due 2020 and $1.400 billion in aggregate
principal amount of
71/4%
first lien notes due 2020, respectively. The net proceeds of
those offerings were used to prepay term loans under our cash
flow credit facility, which currently bears interest at a lower
floating rate. Our ability to refinance our indebtedness on
favorable terms, or at all, is directly affected by the current
global economic and financial conditions. In addition, our
ability to incur secured indebtedness (which would generally
enable us to achieve better pricing than the incurrence of
unsecured indebtedness) depends in part on the value of our
assets, which depends, in turn, on the strength of our cash
flows and results of operations, and on economic and market
conditions and other factors.
If our cash flows and capital resources are insufficient to fund
our debt service obligations or we are unable to refinance our
indebtedness, we may be forced to reduce or delay investments
and capital expenditures, or to sell assets, seek additional
capital or restructure our indebtedness. These alternative
measures may not be successful and may not permit us to meet our
scheduled debt service obligations. If our operating results and
available cash are insufficient to meet our debt service
obligations, we could face substantial liquidity problems and
might be required to dispose of material assets or operations to
meet our debt service and other obligations. We may not be able
to consummate those dispositions, or the proceeds from the
dispositions may not be adequate to meet any debt service
obligations then due.
S-22
Our debt
agreements contain restrictions that limit our flexibility in
operating our business.
Our senior secured credit facilities and the indentures
governing our outstanding notes contain, and the indenture
governing the notes offered hereby will contain, various
covenants that limit our ability to engage in specified types of
transactions. These covenants limit our and certain of our
subsidiaries ability to, among other things:
|
|
|
incur additional indebtedness or issue certain preferred shares;
|
|
|
pay dividends on, repurchase or make distributions in respect of
our capital stock or make other restricted payments;
|
|
|
make certain investments;
|
|
|
sell or transfer assets;
|
|
|
create liens;
|
|
|
consolidate, merge, sell or otherwise dispose of all or
substantially all of our assets; and
|
|
|
enter into certain transactions with our affiliates.
|
Under our asset-based revolving credit facility, when (and for
as long as) the combined availability under our asset-based
revolving credit facility and our senior secured revolving
credit facility is less than a specified amount for a certain
period of time or, if a payment or bankruptcy event of default
has occurred and is continuing, funds deposited into any of our
depository accounts will be transferred on a daily basis into a
blocked account with the administrative agent and applied to
prepay loans under the asset-based revolving credit facility and
to cash collateralize letters of credit issued thereunder.
Under our senior secured credit facilities, we are required to
satisfy and maintain specified financial ratios. Our ability to
meet those financial ratios can be affected by events beyond our
control, and there can be no assurance we will continue to meet
those ratios. A breach of any of these covenants could result in
a default under both the cash flow credit facility and the
asset-based revolving credit facility. Upon the occurrence of an
event of default under the senior secured credit facilities, the
lenders thereunder could elect to declare all amounts
outstanding under the senior secured credit facilities to be
immediately due and payable and terminate all commitments to
extend further credit. If we were unable to repay those amounts,
the lenders under the senior secured credit facilities could
proceed against the collateral granted to them to secure such
indebtedness. We have pledged a significant portion of our
assets under our senior secured credit facilities and that
collateral (other than certain European collateral securing our
senior secured European term loan facility) is also pledged as
collateral under our first lien notes. If any of the lenders
under the senior secured credit facilities accelerate the
repayment of borrowings, there can be no assurance there will be
sufficient assets to repay the senior secured credit facilities,
the first lien notes and the notes offered hereby.
Federal and
state fraudulent transfer laws may permit a court to void the
guarantees, and, if that occurs, you may not receive any
payments on the notes.
Federal and state fraudulent transfer and conveyance statutes
may apply to the issuance of the notes and the incurrence of the
guarantees. Under federal bankruptcy law and comparable
provisions of state fraudulent transfer or conveyance laws,
which may vary from state to state, the notes or guarantees
could be voided as a fraudulent transfer or conveyance if
(1) we or any of the guarantors, as applicable, issued the
notes or incurred the guarantees with the intent of
S-23
hindering, delaying or defrauding creditors or (2) we or
any of the guarantors, as applicable, received less than
reasonably equivalent value or fair consideration in return for
either issuing the notes or incurring the guarantees and, in the
case of (2) only, one of the following is also true at the
time thereof:
|
|
|
we or any of the guarantors, as applicable, were insolvent or
rendered insolvent by reason of the issuance of the notes or the
incurrence of the guarantees;
|
|
|
the issuance of the notes or the incurrence of the guarantees
left us or any of the guarantors, as applicable, with an
unreasonably small amount of capital to carry on the business;
|
|
|
we or any of the guarantors intended to, or believed that we or
such guarantor would, incur debts beyond our or such
guarantors ability to pay as they mature; or
|
|
|
we were or any of the guarantors was a defendant in an action
for money damages, or had a judgment for money damages docketed
against us or such guarantor if, in either case, after final
judgment, the judgment was unsatisfied.
|
If a court were to find that the issuance of the notes or the
incurrence of the guarantee was a fraudulent transfer or
conveyance, the court could void the payment obligations under
the notes or such guarantee or further subordinate the notes or
such guarantee to presently existing and future indebtedness of
ours or of the related guarantor, or require the holders of the
notes to repay any amounts received with respect to such
guarantee. In the event of a finding that a fraudulent transfer
or conveyance occurred, you may not receive any repayment on the
notes. Further, the voidance of the notes could result in an
event of default with respect to our and our subsidiaries
other debt that could result in acceleration of such debt.
As a general matter, value is given for a transfer or an
obligation if, in exchange for the transfer or obligation,
property is transferred or an antecedent debt is secured or
satisfied. A debtor will generally not be considered to have
received value in connection with a debt offering if the debtor
uses the proceeds of that offering to make a dividend payment or
otherwise retire or redeem equity securities issued by the
debtor.
We cannot be certain as to the standards a court would use to
determine whether or not we or the guarantors were solvent at
the relevant time or, regardless of the standard that a court
uses, that the issuance of the guarantees would not be further
subordinated to our or any of our guarantors other debt.
Generally, however, an entity would be considered insolvent if,
at the time it incurred indebtedness:
|
|
|
the sum of its debts, including contingent liabilities, was
greater than the fair saleable value of all its assets;
|
|
|
the present fair saleable value of its assets was less than the
amount that would be required to pay its probable liability on
its existing debts, including contingent liabilities, as they
become absolute and mature; or
|
|
|
it could not pay its debts as they become due.
|
If we default
on our obligations to pay our indebtedness, we may not be able
to make payments on the notes.
Any default under the agreements governing our indebtedness,
including a default under our senior secured credit facilities
that is not waived by the required lenders or a default under
the indentures governing our existing secured notes, and the
remedies sought by the holders of such indebtedness, could
prevent us from paying principal, premium, if any, and interest
on the notes and substantially decrease the market value of the
notes. If we are unable to generate sufficient
S-24
cash flow and are otherwise unable to obtain funds necessary to
meet required payments of principal, premium, if any, and
interest on our indebtedness, or if we otherwise fail to comply
with the various covenants, including financial and operating
covenants, in the instruments governing our indebtedness
(including covenants in our senior secured credit facilities,
the indentures governing the existing secured notes and the
indenture governing the notes), we could be in default under the
terms of the agreements governing such indebtedness. In the
event of such default, the holders of such indebtedness could
elect to declare all the funds borrowed thereunder to be due and
payable, together with accrued and unpaid interest, the lenders
under our senior secured credit facilities could elect to
terminate their commitments thereunder, cease making further
loans and institute foreclosure proceedings against our assets,
and we could be forced into bankruptcy or liquidation. If our
operating performance declines, we may in the future need to
obtain waivers from the required lenders under our senior
secured credit facilities to avoid being in default. If we
breach our covenants under our senior secured credit facilities
and seek a waiver, we may not be able to obtain a waiver from
the required lenders. If this occurs, we would be in default
under the instrument governing that indebtedness, the lenders
could exercise their rights, as described above, and we could be
forced into bankruptcy or liquidation.
Your ability
to transfer the notes may be limited by the absence of an active
trading market, and there is no assurance that any active
trading market will develop for the notes.
The notes are a new issue of securities for which there is no
established public market. The underwriters have advised us that
they intend to make a market in the notes as permitted by
applicable laws and regulations; however, the underwriters are
not obligated to make a market in the notes and they may
discontinue their market-making activities at any time without
notice. Therefore, we cannot assure you that an active market
for the notes will develop or, if developed, that it will
continue. Historically, the market for non investment-grade debt
has been subject to disruptions that have caused substantial
volatility in the prices of securities similar to the notes.
We cannot assure you that the market, if any, for the notes will
be free from similar disruptions or that any such disruptions
may not adversely affect the prices at which you may sell your
notes. In addition, subsequent to their initial issuance, the
notes may trade at a discount from their initial offering price,
depending upon prevailing interest rates, the market for similar
notes, our performance and other factors.
The Issuer may
not be able to repurchase the notes upon a change of
control.
Under certain circumstances, and upon the occurrence of specific
kinds of change of control events, the Issuer will be required
to offer to repurchase all outstanding notes at 101% of their
principal amount plus accrued and unpaid interest. The source of
funds for any such purchase of the notes will be the
Issuers available cash or cash generated from its
subsidiaries operations or other sources, including
borrowings, sales of assets or sales of equity. The Issuer may
not be able to repurchase the notes upon a change of control
because the Issuer may not have sufficient financial resources
to purchase all of the notes that are tendered upon a change of
control. Further, the Issuer is contractually restricted under
the terms of the senior secured credit facilities from
repurchasing all of the notes tendered by holders upon a change
of control. Accordingly, the Issuer may not be able to satisfy
our obligations to purchase the notes unless it is able to
refinance or obtain waivers under the instruments governing that
indebtedness. The Issuers failure to repurchase the notes
upon a change of control would cause a default under the
indentures and a cross-default under the instruments governing
our senior secured credit
S-25
facilities and the indentures governing the existing secured
notes. The instruments governing the senior secured credit
facilities also provide that a change of control will be a
default that permits lenders to accelerate the maturity of
borrowings thereunder. Any of the Issuers future debt
agreements may contain similar provisions.
Risks related to
the secured notes
The secured
indebtedness under our senior secured asset-based revolving
credit facility will be effectively senior to the secured notes
to the extent of the value of the receivables collateral
securing such facility on a first-priority basis.
Our asset-based revolving credit facility has a first-priority
lien in the accounts receivable of our company and our domestic
subsidiaries, with certain exceptions. Our other senior secured
credit facilities and the first lien notes have, and the secured
notes offered hereby will have, a second-priority lien in those
receivables (except for those of certain special purpose
subsidiaries that only guarantee and pledge their assets under
our asset-based revolving credit facility). The indentures
governing the existing secured notes permit, and the indenture
governing the secured notes offered hereby will permit, us to
incur additional indebtedness secured on a first-priority basis
by such assets in the future. The first-priority liens in the
collateral securing indebtedness under our asset-based revolving
credit facility and any such future indebtedness will be higher
in priority as to such collateral than the security interests
securing the secured notes and the guarantees. Holders of the
indebtedness under our asset-based revolving credit facility and
any other indebtedness secured by higher priority liens on such
collateral will be entitled to receive proceeds from the
realization of value of such collateral to repay such
indebtedness in full before the holders of the secured notes
will be entitled to any recovery from such collateral. As a
result, holders of the secured notes will only be entitled to
receive proceeds from the realization of value of assets
securing our asset-based revolving credit facility on a higher
priority basis after all indebtedness and other obligations
under our asset-based revolving credit facility and any other
obligations secured by higher priority liens on such assets are
repaid in full. The secured notes will be effectively junior in
right of payment to indebtedness under our asset-based revolving
credit facility and any other indebtedness secured by higher
priority liens on such collateral to the extent of the
realizable value of such collateral. Even if there were
receivables collateral or proceeds left over to pay the secured
notes, the first lien notes and the cash flow credit facility
after a foreclosure on that collateral and payment of the
outstanding amounts under the asset-based revolving credit
facility, that collateral would be subject to the first lien
intercreditor agreement, and the representative of the lenders
under the cash flow credit facility would initially control
actions with respect to that collateral. See Even
though the holders of the secured notes will benefit from a
first-priority lien on the collateral that secures our cash flow
credit facility and our first lien notes, the representative of
the lenders under the cash flow credit facility will initially
control actions with respect to that collateral.
As of March 31, 2011, on an as adjusted basis after giving
effect to the June redemptions and the notes offered hereby, the
secured notes offered hereby would have been effectively junior
to $1.450 billion of indebtedness outstanding under our
asset-based revolving credit facility to the extent of the value
of collateral securing such indebtedness.
S-26
The value of
the collateral securing the secured notes may not be sufficient
to satisfy our obligations under the secured
notes.
No appraisal of the value of the collateral has been made in
connection with this offering, and the fair market value of the
collateral is subject to fluctuations based on factors that
include, among others, general economic conditions and similar
factors. The amount to be received upon a sale of the collateral
would be dependent on numerous factors, including, but not
limited to, the actual fair market value of the collateral at
such time, the timing and the manner of the sale and the
availability of buyers. By its nature, portions of the
collateral may be illiquid and may have no readily ascertainable
market value. In the event of a foreclosure, liquidation,
bankruptcy or similar proceeding, the collateral may not be sold
in a timely or orderly manner, and the proceeds from any sale or
liquidation of this collateral may not be sufficient to pay our
obligations under the secured notes.
To the extent that liens securing obligations under the senior
secured credit facilities and the first lien notes, pre-existing
liens, liens permitted under the indenture governing the notes
offered hereby and other rights, including liens on excluded
assets, such as those securing purchase money obligations and
capital lease obligations granted to other parties (in addition
to the holders of any other obligations secured by higher
priority liens), encumber any of the collateral securing the
secured notes and the guarantees, those parties have or may
exercise rights and remedies with respect to the collateral that
could adversely affect the value of the collateral and the
ability of the collateral agent, the trustee under the indenture
governing the secured notes offered hereby or the holders of the
secured notes to realize or foreclose on the collateral.
The secured notes and the related guarantees will be secured,
subject to permitted liens, by a first-priority lien in the
collateral that secures our cash flow credit facility and our
first lien notes on a first-priority basis (other than any
European collateral securing our senior secured European term
loan facility) and will share equally in right of payment to the
extent of the value of such collateral securing such cash flow
credit facility and first lien notes on a first-priority basis.
The secured notes and the related guarantees will not be secured
by any of the European collateral described in Description
of other indebtednessSenior secured credit
facilitiesGuarantee and security. The indenture
governing the secured notes offered hereby will permit us to
incur additional indebtedness secured by a lien that ranks
equally with the secured notes. Any such indebtedness may
further limit the recovery from the realization of the value of
such collateral available to satisfy holders of the secured
notes.
There may not be sufficient collateral to pay off all amounts we
may borrow under our senior secured credit facilities, the first
lien notes, the secured notes offered hereby and additional
secured notes that we may offer that would be secured on the
same basis as the secured notes offered hereby. Liquidating the
collateral securing the secured notes may not result in proceeds
in an amount sufficient to pay any amounts due under the secured
notes after also satisfying the obligations to pay any creditors
with prior liens. If the proceeds of any sale of collateral are
not sufficient to repay all amounts due on the secured notes,
the holders of the secured notes (to the extent not repaid from
the proceeds of the sale of the collateral) would have only a
senior unsecured, unsubordinated claim against our and the
subsidiary guarantors remaining assets.
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Claims of
noteholders will be structurally subordinate to claims of
creditors of all of our
non-U.S.
subsidiaries and some of our U.S. subsidiaries because they will
not guarantee the notes.
The notes will not be guaranteed by any of our
non-U.S. subsidiaries,
our less than wholly-owned U.S. subsidiaries or certain
other U.S. subsidiaries. Accordingly, claims of holders of
the notes will be structurally subordinate to the claims of
creditors of these non-guarantor subsidiaries, including trade
creditors. All obligations of our non-guarantor subsidiaries
will have to be satisfied before any of the assets of such
subsidiaries would be available for distribution, upon a
liquidation or otherwise, to us or a guarantor of the notes.
For the three months ended March 31, 2011, on an as
adjusted basis after giving effect to the June redemptions and
the notes offered hereby and the use of proceeds therefrom, our
non-guarantor subsidiaries would have accounted for
approximately $3.477 billion, or 43.2%, of our total
revenues and approximately $689 million, or 43.3%, of our
total Adjusted EBITDA. As of March 31, 2011, our
non-guarantor subsidiaries accounted for approximately
$9.840 billion, or 41.3%, of our total assets and
approximately $5.969 billion, or 18.9%, of our total
liabilities.
The lien
ranking provisions of the indenture and other agreements
relating to the collateral securing the secured notes on a
second priority basis will limit the rights of holders of the
secured notes with respect to that collateral, even during an
event of default.
The rights of the holders of the secured notes with respect to
the receivables collateral that secures the asset-based
revolving credit facility on a first-priority basis and that
secures our cash flow credit facility and our first lien notes,
and will secure the secured notes offered hereby, on a
second-priority basis will be substantially limited by the terms
of the lien ranking agreements set forth in the indenture and
the applicable receivables intercreditor agreement, even during
an event of default. Under the indenture and the applicable
receivables intercreditor agreement, at any time that
obligations that have the benefit of the higher priority liens
are outstanding, any actions that may be taken with respect to
such collateral, including the ability to cause the commencement
of enforcement proceedings against such collateral, to control
the conduct of such proceedings and to approve amendments to
releases of such collateral from the lien of, and waive past
defaults under, such documents relating to such collateral, will
be at the direction of the holders of the obligations secured by
the first-priority liens, and the holders of the secured notes
secured by lower-priority liens may be adversely affected.
In addition, the indenture and the applicable receivables
intercreditor agreement will contain certain provisions
benefiting holders of indebtedness under our asset-based
revolving credit facility, including provisions requiring the
trustee and the collateral agent not to object following the
filing of a bankruptcy petition to certain important matters
regarding the receivables collateral. After such filing, the
value of this collateral could materially deteriorate, and
holders of the secured notes would be unable to raise an
objection.
The receivables collateral that will secure the secured notes
and guarantees on a lower-priority basis will also be subject to
any and all exceptions, defects, encumbrances, liens and other
imperfections as may be accepted by the lenders under our
asset-based revolving credit facility, whether on or after the
date the secured notes and guarantees are issued. The existence
of any such exceptions, defects, encumbrances, liens and other
imperfections could adversely affect the value of the collateral
securing the secured notes, as well as the ability of the
collateral agent to realize or foreclose on such collateral. The
underwriters have neither analyzed the effect of, nor
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participated in any negotiations relating to, such exceptions,
defects, encumbrances, liens and imperfections, and the
existence thereof could adversely affect the value of the
collateral that will secure the secured notes as well as the
ability of the collateral agent to realize or foreclose on such
collateral.
Even though
the holders of the secured notes will benefit from a
first-priority lien on the collateral that secures our cash flow
credit facility and our first lien notes, the representative of
the lenders under the cash flow credit facility will initially
control actions with respect to that collateral.
The rights of the holders of the secured notes with respect to
the collateral that will secure the secured notes on a
first-priority basis will be subject to a first lien
intercreditor agreement among all holders of obligations secured
by that collateral on a first-priority basis, including the
obligations under our cash flow credit facility and our first
lien notes. Under that intercreditor agreement, any actions that
may be taken with respect to such collateral, including the
ability to cause the commencement of enforcement proceedings
against such collateral, to control such proceedings and to
approve amendments to releases of such collateral from the lien
of, and waive past defaults under, such documents relating to
such collateral, will be at the direction of the authorized
representative of the lenders under the cash flow credit
facility until (1) our obligations under the cash flow
credit facility are discharged (which discharge does not include
certain refinancings of the cash flow credit facility) or
(2) 90 days after the occurrence of an event of
default under the indentures governing the first lien notes or
the indenture governing the secured notes offered hereby. Under
the circumstances described in clause (2) of the preceding
sentence, the authorized representative of the holders of the
indebtedness that represents the largest outstanding principal
amount of indebtedness secured by a first-priority lien on the
collateral (other than the cash flow credit facility) and has
complied with the applicable notice provisions gains the right
to take actions with respect to the collateral.
Even if the authorized representative of the secured notes
offered hereby gains the right to direct the collateral agent in
the circumstances described in clause (2) above, the
authorized representative must stop doing so (and those powers
with respect to the collateral would revert to the authorized
representative of the lenders under the cash flow credit
facility) if the lenders authorized representative has
commenced and is diligently pursuing enforcement action with
respect to the collateral or the grantor of the security
interest in that collateral (whether our company or the
applicable subsidiary guarantor) is then a debtor under or with
respect to (or otherwise subject to) an insolvency or
liquidation proceeding.
In addition, the senior secured credit facilities permit, the
indentures governing the existing secured notes permit and the
indenture governing the notes offered hereby will permit us to
issue additional series of secured notes that also have a
first-priority lien on the same collateral. As explained above,
any time that the representative of the lenders under the cash
flow credit facility does not have the right to take actions
with respect to the collateral pursuant to the first lien
intercreditor agreement, that right passes to the authorized
representative of the holders of the next largest outstanding
principal amount of indebtedness secured by a first-priority
lien on the collateral. If we issue additional first lien notes
in the future in a greater principal amount than the secured
notes offered hereby, then the authorized representative for
those additional secured notes would be earlier in line to
exercise rights under the first lien intercreditor agreement
than the authorized representative for the secured notes offered
hereby.
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Under the first lien intercreditor agreement, the authorized
representative of the holders of the secured notes offered
hereby may not object following the filing of a bankruptcy
petition to any
debtor-in-possession
financing or to the use of the shared collateral to secure that
financing, subject to conditions and limited exceptions. After
such a filing, the value of this collateral could materially
deteriorate, and holders of the secured notes would be unable to
raise an objection.
The collateral that will secure the secured notes and guarantees
on a first-priority basis will also be subject to any and all
exceptions, defects, encumbrances, liens and other imperfections
as may be accepted by the authorized representative of the
lenders under our cash flow credit facility or of a series of
first lien notes during any period that such authorized
representative controls actions with respect to the collateral
pursuant to the first lien intercreditor agreement. The
existence of any such exceptions, defects, encumbrances, liens
and other imperfections could adversely affect the value of the
collateral securing the secured notes as well as the ability of
the collateral agent to realize or foreclose on such collateral
for the benefit of the holders of the secured notes. The
underwriters have neither analyzed the effect of, nor
participated in any negotiations relating to, such exceptions,
defects, encumbrances, liens and imperfections, and the
existence thereof could adversely affect the value of the
collateral that will secure the secured notes as well as the
ability of the collateral agent to realize or foreclose on such
collateral for the benefit of the holders of the secured notes.
We will in
most cases have control over the collateral, and the sale of
particular assets by us could reduce the pool of assets securing
the secured notes and the guarantees.
The collateral documents allow us to remain in possession of,
retain exclusive control over, freely operate, and collect,
invest and dispose of any income from, the collateral securing
the secured notes and the guarantees, except, under certain
circumstances, cash transferred to accounts controlled by the
administrative agent under our asset-based revolving credit
facility.
In addition, we will not be required to comply with all or any
portion of Section 314(d) of the Trust Indenture Act
of 1939 (the Trust Indenture Act) if we
determine, in good faith based on advice of counsel, that, under
the terms of that Section
and/or any
interpretation or guidance as to the meaning thereof of the SEC
and its staff, including no action letters or
exemptive orders, all or such portion of Section 314(d) of
the Trust Indenture Act is inapplicable to the released
collateral. For example, so long as no default or event of
default under the indenture would result therefrom and such
transaction would not violate the Trust Indenture Act, we
may, among other things, without any release or consent by the
indenture trustee, conduct ordinary course activities with
respect to collateral, such as selling, factoring, abandoning or
otherwise disposing of collateral and making ordinary course
cash payments (including repayments of indebtedness). See
Description of the secured notes.
There are
circumstances other than repayment or discharge of the secured
notes under which the collateral securing the secured notes and
guarantees will be released automatically, without your consent
or the consent of the trustee.
Under various circumstances, collateral securing the secured
notes will be released automatically, including:
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a sale, transfer or other disposal of such collateral in a
transaction not prohibited under the indenture;
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with respect to collateral held by a guarantor, upon the release
of such guarantor from its guarantee;
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with respect to collateral that is capital stock, upon the
dissolution of the issuer of such capital stock in accordance
with the indenture;
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with respect to any receivables collateral in which the secured
notes have a second-priority lien, upon any release by the
lenders under our asset-based revolving credit facility of their
first-priority security interest in such collateral; provided
that, if the release occurs in connection with a foreclosure or
exercise of remedies by the collateral agent for the lenders
under our asset-based revolving credit facility, the lien on
that collateral will be automatically released but any proceeds
thereof not used to repay the obligations under our asset-based
revolving credit facility will be subject to a lien in favor of
the collateral agent for the secured noteholders and our cash
flow credit facility;
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with respect to the collateral upon which the secured notes have
a first-priority lien, upon any release by the lenders under the
cash flow credit facility (including in connection with a
foreclosure or exercise of remedies with respect to that
collateral directed by the authorized representative of the
lenders under our cash flow credit facility during any period
that such authorized representative controls actions with
respect to the collateral pursuant to the first lien
intercreditor agreement); and
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the collateral securing the secured notes will be released once
the secured notes achieve investment grade ratings from
Moodys Investors Service, Inc. and Standard &
Poors Rating Services, and at such time no default or
event of default has occurred and is continuing.
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Even though the holders of the secured notes share ratably with
the lenders under our cash flow credit facility, the authorized
representative of the lenders under our cash flow credit
facility will initially control actions with respect to the
collateral, whether or not the holders of the secured notes
agree or disagree with those actions. See Even
though the holders of the secured notes will benefit from a
first-priority lien on the collateral that secures our cash flow
credit facility and our first lien notes, the representative of
the lenders under the cash flow credit facility will initially
control actions with respect to that collateral.
In addition, the guarantee of a subsidiary guarantor will be
automatically released to the extent it is released under the
senior secured credit facilities or in connection with a sale of
such subsidiary guarantor in a transaction not prohibited by the
indenture.
The indenture will also permit us to designate one or more of
our restricted subsidiaries that is a guarantor of the secured
notes as an unrestricted subsidiary. If we designate a
subsidiary guarantor as an unrestricted subsidiary for purposes
of the indenture governing the secured notes, all of the liens
on any collateral owned by such subsidiary or any of its
subsidiaries and any guarantees of the secured notes by such
subsidiary or any of its subsidiaries will be released under the
indenture but not necessarily under our senior secured credit
facilities. Designation of an unrestricted subsidiary will
reduce the aggregate value of the collateral securing the
secured notes to the extent that liens on the assets of the
unrestricted subsidiary and its subsidiaries are released. In
addition, the creditors of the unrestricted subsidiary and its
subsidiaries will have a senior claim on the assets of such
unrestricted subsidiary and its subsidiaries. See
Description of the secured notes.
S-31
The imposition
of certain permitted liens will cause the assets on which such
liens are imposed to be excluded from the collateral securing
the secured notes and the guarantees. There are also certain
other categories of property that are excluded from the
collateral.
The indenture will permit liens in favor of third parties to
secure additional debt, including purchase money indebtedness
and capital lease obligations, and any assets subject to such
liens will be automatically excluded from the collateral
securing the secured notes and the guarantees. Our ability to
incur purchase money indebtedness and capital lease obligations
is subject to the limitations as described in Description
of the secured notes. In addition, certain categories of
assets are excluded from the collateral securing the secured
notes and the guarantees. Excluded assets include the assets of
our non-guarantor subsidiaries and equity investees, certain
capital stock and other securities of our subsidiaries and
equity investees, certain properties that do not secure our
senior secured credit facilities, certain European collateral
that secures our senior secured European term loan facility,
deposit accounts, other bank or securities accounts, cash,
leaseholds and motor vehicles, and the proceeds from any of the
foregoing. Also, the lien on properties defined as
principal properties under our existing indenture
dated as of December 16, 1993, so long as that indenture
remains in effect, will be limited to securing a portion of the
indebtedness under our cash flow credit facility, the first lien
notes and the secured notes offered hereby that, in the
aggregate, does not exceed 10% of our consolidated net tangible
assets. See Description of the secured notes. If an
event of default occurs and the secured notes are accelerated,
the secured notes and the guarantees will rank equally with the
holders of other unsubordinated and unsecured indebtedness of
the relevant entity with respect to such excluded property.
As of March 31, 2011, our non-guarantor subsidiaries
accounted for approximately $9.840 billion, or 41.3%, of
our total assets and approximately $5.969 billion, or
18.9%, of our total liabilities.
The pledge of
the capital stock, other securities and similar items of our
subsidiaries that secure the secured notes will automatically be
released from the lien on them and no longer constitute
collateral for so long as the pledge of such capital stock or
such other securities would require the filing of separate
financial statements with the SEC for that
subsidiary.
The secured notes and the guarantees will be secured by a pledge
of the stock of some of our subsidiaries. Under the SEC
regulations in effect as of the issue date of the secured notes,
if the par value, book value as carried by us or market value
(whichever is greatest) of the capital stock, other securities
or similar items of a subsidiary pledged as part of the
collateral is greater than or equal to 20% of the aggregate
principal amount of the secured notes then outstanding, such
subsidiary would be required to provide separate financial
statements to the SEC. Therefore, the indenture and the
collateral documents provide that any capital stock and other
securities of any of our subsidiaries will be excluded from the
collateral for so long as the pledge of such capital stock or
other securities to secure the secured notes would cause such
subsidiary to be required to file separate financial statements
with the SEC pursuant to
Rule 3-16
of
Regulation S-X
(as in effect from time to time).
As a result, holders of the secured notes could lose a portion
or all of their security interest in the capital stock or other
securities of those subsidiaries during such period. It may be
more difficult, costly and time-consuming for holders of the
secured notes to foreclose on the assets of a subsidiary than to
foreclose on its capital stock or other securities, so the
proceeds realized upon any such foreclosure could be
significantly less than those that would have been received
S-32
upon any sale of the capital stock or other securities of such
subsidiary. See Description of the secured
notesSecurity.
Your rights in
the collateral may be adversely affected by the failure to
perfect security interests in certain collateral in the
future.
Applicable law requires that certain property and rights
acquired after the grant of a general security interest, such as
real property, equipment subject to a certificate and certain
proceeds, can only be perfected at the time such property and
rights are acquired and identified. The trustee or the
collateral agent may not monitor, or we may not inform the
trustee or the collateral agent of, the future acquisition of
property and rights that constitute collateral, and necessary
action may not be taken to properly perfect the security
interest in such after-acquired collateral. The collateral agent
for the secured notes has no obligation to monitor the
acquisition of additional property or rights that constitute
collateral or the perfection of any security interest in favor
of the secured notes against third parties. Such failure may
result in the loss of the security interest therein or the
priority of the security interest in favor of the secured notes
against third parties.
In addition, the documentation related to the secured notes will
provide that the Issuer is obligated to deliver mortgage
amendments and related documentation to the collateral agent for
the secured notes within 60 days after the secured notes
are issued in order to provide the holders of such secured notes
a perfected security interest in certain real property we own.
Until such time as such mortgage amendments and related
documentation are delivered, if at all, such real estate and the
value thereof will not constitute collateral securing the
secured notes.
Moreover, in connection with the delivery of the mortgage
amendments, we are not required to cause the title insurance
policies insuring the existing mortgages to be endorsed in favor
of the collateral agent for the benefit of the holders of the
secured notes. Accordingly, there is no independent assurance
that no intervening liens exist, which would have priority over
the mortgage liens in favor of the collateral agent for the
benefit of the holders of the secured notes.
The collateral
is subject to casualty risks.
We intend to maintain insurance or otherwise insure against
hazards in a manner appropriate and customary for our business.
There are, however, certain losses that may be either
uninsurable or not economically insurable, in whole or in part.
Insurance proceeds may not compensate us fully for our losses.
If there is a complete or partial loss of any of the pledged
collateral, the insurance proceeds may not be sufficient to
satisfy all of the secured obligations, including the secured
notes and the guarantees.
In the event
of our bankruptcy, the ability of the holders of the secured
notes to realize upon the collateral will be subject to certain
bankruptcy law limitations.
The ability of holders of the secured notes to realize upon the
collateral will be subject to certain bankruptcy law limitations
in the event of our bankruptcy. Under applicable
U.S. federal bankruptcy laws, secured creditors are
prohibited from repossessing their security from a debtor in a
bankruptcy case without bankruptcy court approval and may be
prohibited from disposing of security repossessed from such a
debtor without bankruptcy court approval. Moreover, applicable
federal bankruptcy laws generally permit the debtor to continue
to retain collateral,
S-33
including cash collateral, even though the debtor is in default
under the applicable debt instruments, provided that the secured
creditor is given adequate protection.
The meaning of the term adequate protection may vary
according to the circumstances, but is intended generally to
protect the value of the secured creditors interest in the
collateral at the commencement of the bankruptcy case and may
include cash payments or the granting of additional security if
and at such times as the court, in its discretion, determines
that a diminution in the value of the collateral occurs as a
result of the stay of repossession or the disposition of the
collateral during the pendency of the bankruptcy case. In view
of the lack of a precise definition of the term adequate
protection and the broad discretionary powers of a
U.S. bankruptcy court, we cannot predict whether or when
the collateral agent for the secured notes could foreclose upon
or sell the collateral or whether or to what extent holders of
secured notes would be compensated for any delay in payment or
loss of value of the collateral through the requirement of
adequate protection.
Moreover, the collateral agent may need to evaluate the impact
of the potential liabilities before determining to foreclose on
collateral consisting of real property, if any, because secured
creditors that hold a security interest in real property may be
held liable under environmental laws for the costs of
remediating or preventing the release or threatened release of
hazardous substances at such real property. Consequently, the
collateral agent may decline to foreclose on such collateral or
exercise remedies available in respect thereof if it does not
receive indemnification to its satisfaction from the holders of
the secured notes.
Risks related to
the unsecured notes
The Issuer is
the sole obligor of the notes and its parent, HCA Holdings, Inc.
is the sole guarantor of the Issuers obligations under the
notes; the notes are unsecured and the Issuers
subsidiaries do not have any obligation with respect to the
notes; the notes are structurally subordinated to all of the
debt and liabilities of the Issuers subsidiaries and will
be effectively subordinated to any of the Issuers secured
debt.
The Issuer and the guarantor of the unsecured notes, HCA
Holdings, Inc., are holding companies that have no operations of
their own and derive all of their revenues and cash flow from
their subsidiaries. The Issuers subsidiaries are separate
and distinct legal entities and have no obligation, contingent
or otherwise, to pay amounts due under the unsecured notes or to
make any funds available to pay those amounts, whether by
dividend, distribution, loan or other payments. The unsecured
notes are structurally subordinated to all debt and liabilities
of the Issuers subsidiaries and the Issuers parent,
HCA Holdings, Inc. The claims of HCA Holdings, Inc.s
creditors and the Issuers subsidiaries creditors
will be required to be paid before holders of the unsecured
notes have a claim (if any) against the entities and their
assets. In the event of a bankruptcy, liquidation or
reorganization or similar proceeding relating to the
Issuers subsidiaries, you will participate with all other
holders of the Issuers indebtedness in the assets
remaining after the Issuers subsidiaries have paid all of
their debt and liabilities. In any of these cases, the
Issuers subsidiaries may not have sufficient funds to make
payments to the Issuer, and you may receive less, ratably, than
the holders of debt of the Issuers subsidiaries and other
liabilities.
As of March 31, 2011, on an as adjusted basis after giving
effect to the June redemptions and the notes offered hereby and
the use of proceeds therefrom, the aggregate amount of
indebtedness of the Issuers subsidiaries would have been
$22.496 billion, $16.670 billion of which would have
been secured and all of which would have been structurally
senior to the
S-34
unsecured notes. In addition, as of that date, on an adjusted
basis after giving effect to the June redemptions and the notes
offered hereby and the use of proceeds therefrom, the
Issuers subsidiaries could have borrowed
$1.917 billion under HCA Inc.s senior secured
revolving credit facility and $550 million under its
asset-based revolving credit facility, after giving effect to
letters of credit and borrowing base limitations. In addition,
holders of the Issuers subsidiaries debt will have
claims that are prior to your claims as holders of the unsecured
notes. Additionally, the indenture governing the notes offered
hereby, the indentures governing HCA Holdings, Inc. and HCA
Inc.s outstanding notes and HCA Inc.s senior secured
credit facilities permit us
and/or our
subsidiaries to incur additional indebtedness, including secured
indebtedness, under certain circumstances.
The Issuer and
the guarantor of the unsecured notes are holding companies with
no independent operations or assets. Repayment of the notes is
dependent on cash flow generated by the Issuers
subsidiaries. Restrictions in our subsidiaries debt
instruments and under applicable law limit their ability to
provide funds to us.
The Issuers and HCA Holdings, Inc.s operations are
conducted through their subsidiaries and their ability to make
payment on the notes is dependent on the earnings and the
distribution of funds from its subsidiaries. Their earnings are
subject to prevailing economic and competitive conditions and to
certain financial, business and other factors beyond their and
the Issuers control. In addition, only HCA Holdings, Inc.,
as sole guarantor of the unsecured notes, is obligated to make
funds available to the Issuer for payment on the notes. The
Issuers subsidiaries are not obligated to make funds
available to the Issuer for payment on the notes. The agreements
governing the current and future indebtedness of the
Issuers subsidiaries may not permit the Issuers
subsidiaries to provide the Issuer with sufficient dividends,
distributions or loans to fund scheduled interest and principal
payments on these notes when due. The terms of the senior
secured credit facilities significantly restrict the
Issuers subsidiaries from paying dividends and otherwise
transferring assets to the Issuer. In addition, if the
Issuers subsidiaries do not generate sufficient cash flow
from operations to satisfy their and the Issuers debt
service obligations, including payments on the notes, we may
have to undertake alternative financing plans, such as
refinancing or restructuring our indebtedness, selling assets,
reducing or delaying capital investments or seeking to raise
additional capital. Our ability to restructure or refinance our
debt will depend on the capital markets and our financial
condition at such time. Any refinancing of our debt could be at
higher interest rates and may require us to comply with more
onerous covenants, which could further restrict our business
operations. In addition, the terms of existing or future debt
instruments may restrict us from adopting some of these
alternatives. Our inability to generate sufficient cash flow to
satisfy our debt service obligations, or to refinance our
obligations on commercially reasonable terms, would have an
adverse effect, which could be material, on our business,
financial position, results of operations and cash flows, as
well as on our ability to satisfy our obligations in respect of
the notes.
S-35
Use of
proceeds
We estimate that our net proceeds from this offering, after
deducting underwriter discounts and commissions and estimated
offering expenses, will be approximately $4.939 billion.
We intend to use the net proceeds from the notes offered hereby,
together with $284 million of borrowings under our
asset-based revolving credit facility, to redeem and repurchase
all of (i) the $1.578 billion outstanding
95/8%/103/8%
second lien toggle notes due 2016, (ii) the $3.200 billion
outstanding
91/4%
second lien notes due 2016 and (iii) for related fees and
expenses.
Certain of the underwriters and/or their affiliates may be
holders of our
95/8%/103/8%
second lien toggle notes due 2016 and/or our
91/4%
second lien notes due 2016 and, accordingly, may receive a
portion of the net proceeds of this offering in connection with
the redemption of those notes. However, none of the
underwriters, nor any of their affiliates will receive net
proceeds of this offering equal to or in excess of 5% of the net
proceeds of this offering. See Underwriting (conflicts of
interest).
S-36
Capitalization
The following table sets forth the capitalization of HCA Inc. as
of March 31, 2011:
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as adjusted to give effect to our redemption in June 2011 of all
$1.000 billion aggregate principal amount of
91/8%
second lien notes due 2014 and $108.5 million aggregate
principal amount of
97/8%
second lien notes due 2017 (the June
redemptions); and
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as further adjusted to give effect to this offering and the use
of proceeds therefrom, together with the related
$284 million of borrowings under the asset-based revolving
credit facility, to redeem all of the $1.578 billion
aggregate principal amount of
95/8%/103/8%
second lien toggle notes due 2016 and all of the
$3.200 billion aggregate principal amount of
91/4%
second lien notes due 2016.
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The information in this table should be read in conjunction with
SummarySummary financial data, included in
this prospectus supplement and our consolidated financial
statements and related notes and condensed consolidated
financial statements and related notes incorporated by reference
herein.
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As of March 31, 2011
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As adjusted
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As further
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for the June
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adjusted for this
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(dollars in millions)
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redemptions
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|
offering
|
|
|
|
|
|
(unaudited)
|
|
|
Cash and cash equivalents
|
|
$
|
553
|
|
|
$
|
553
|
|
|
|
|
|
|
|
Senior secured credit
facilities(1)
|
|
$
|
8,720
|
|
|
$
|
9,004
|
|
Existing first lien
notes(2)
|
|
|
4,076
|
|
|
|
4,076
|
|
Secured notes offered hereby
|
|
|
|
|
|
|
3,000
|
|
Other secured
indebtedness(3)
|
|
|
314
|
|
|
|
314
|
|
Existing second lien
notes(4)
|
|
|
4,974
|
|
|
|
196
|
|
|
|
|
|
|
|
|
|
|
Total senior secured indebtedness
|
|
|
18,084
|
|
|
|
16,590
|
|
Existing unsecured
indebtedness(5)
|
|
|
7,342
|
|
|
|
7,342
|
|
Senior unsecured notes offered hereby
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
25,426
|
|
|
|
25,932
|
|
|
|
|
|
|
|
|
|
|
Stockholders deficit attributable to HCA Holdings,
Inc.
|
|
|
(8,977
|
)
|
|
|
(9,226
|
)
|
Noncontrolling interests
|
|
|
1,142
|
|
|
|
1,142
|
|
|
|
|
|
|
|
|
|
|
Total stockholders deficit
|
|
|
(7,835
|
)
|
|
|
(8,084
|
)
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
17,591
|
|
|
$
|
17,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Consists of (i) a
$2.000 billion asset-based revolving credit facility
maturing on November 16, 2012 (the asset-based
revolving credit facility) ($1.450 billion
outstanding at March 31, 2011, as adjusted to give effect
to the June redemptions and the notes offered hereby);
(ii) a $2.000 billion senior secured revolving credit
facility maturing on November 17, 2015 (the senior
secured revolving credit facility) (none outstanding at
March 31, 2011, without giving effect to outstanding
letters of credit); (iii) a $487 million senior
secured term loan
A-1 facility
maturing on November 17, 2012; (iv) a
$594 million senior secured term loan
A-2 facility
maturing on May 2, 2016; (v) a $1.689 billion
senior secured term loan B-1 facility maturing on
November 17, 2013; (vi) a $2.000 billion senior
secured term loan B-2 facility maturing on March 31, 2017;
(vii) a $2.373 billion senior secured term loan B-3
facility maturing on May 1, 2018; and (viii) a
291 million, or $411 million-equivalent, senior
secured European term loan facility maturing on
November 17, 2013. We refer to the facilities described
under (ii) through (viii) above, collectively, as the
cash flow credit facility and, together with the
asset-based revolving credit facility, the senior secured
credit facilities. Does not give effect to amounts that
may be drawn under the revolving credit facility to fund our
acquisition of
HCA-HealthONE®,
LLC, if consummated. See SummaryRecent
developments.
|
S-37
|
|
|
(2)
|
|
Consists of
(i) $1.500 billion aggregate principal amount of
81/2%
first lien notes due 2019 that HCA Inc. issued in April 2009
(the April 2009 first lien notes); (ii) $1.250
billion aggregate principal amount of
77/8%
first lien notes due 2020 that HCA Inc. issued in August 2009
(the August 2009 first lien notes),
(iii) $1.400 billion aggregate principal amount of
71/4%
first lien notes due 2020 that HCA Inc. issued in March 2010
(the March 2010 first lien notes and, collectively
with the April 2009 first lien notes and the August 2009 first
lien notes, the first lien notes) and
(iv) $74 million of unamortized debt discounts that
reduce the existing indebtedness.
|
|
(3)
|
|
Consists of capital leases and
other secured debt with a weighted average interest rate of
7.12%.
|
|
(4)
|
|
Consists of
(i) $3.200 billion of
91/4% second
lien notes due 2016 (all of which are intended to be redeemed
with the net proceeds from this offering),
(ii) $1.578 billion of
95/8%/103/8%
second lien toggle notes due 2016 (all of which are intended to
be redeemed with the net proceeds from this offering),
(iii) $310 million aggregate principal amount of
97/8% second
lien notes due 2017 ($108.5 million of which were redeemed
in the June redemptions) and (iv) $6 million of
unamortized debt discounts that reduce the existing
indebtedness. We refer to the notes issued in (i) through
(iii) above, collectively as the second lien
notes and, together with the first lien notes, the
existing secured notes.
|
|
(5)
|
|
Consists of HCA Inc.s
(i) an aggregate principal amount of $246 million
medium-term notes with maturities ranging from 2014 to 2025 and
a weighted average interest rate of 8.28%; (ii) an
aggregate principal amount of $886 million debentures with
maturities ranging from 2015 to 2095 and a weighted average
interest rate of 7.55%; (iii) an aggregate principal amount
of $4.694 billion senior notes with maturities ranging from
2012 to 2033 and a weighted average interest rate of 6.54%; and
(iv) $9 million of unamortized debt discounts that
reduce the existing indebtedness. Existing unsecured
indebtedness also includes HCA Holdings, Inc.s
$1.525 billion aggregate principal amount of
73/4% senior
notes due 2010. For more information regarding our unsecured and
other indebtedness, see Description of other
indebtedness.
|
S-38
Recent
developments
The following table sets forth our summary financial and other
data at the dates and for the periods indicated. The summary
financial data as of June 30, 2011 and for the quarter and
six months ended June 30, 2011 and 2010 have been derived
from our unaudited condensed consolidated financial statements
not included in this prospectus supplement and is subject to
revision based on the completion of the accounting and financial
reporting process necessary to finalize our financial statements
as of and for the period ended June 30, 2011. The results
of operations for the interim periods are not necessarily
indicative of the results to be expected for any future period.
The summary financial and other data should be read in
conjunction with SummarySummary financial data
included in this prospectus supplement and with Selected
Financial Data, Managements Discussion and
Analysis of Financial Condition and Results of Operations,
our audited consolidated financial statements and the related
notes thereto and our unaudited condensed consolidated financial
statements and the related notes thereto incorporated by
reference into this prospectus supplement.
2011 Second
Quarter Results
HCA Holdings,
Inc.
Condensed Consolidated Income Statements
For the Quarters Ended June 30, 2011 and
2010
(Dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Revenues
|
|
$
|
8,063
|
|
|
|
100.0
|
%
|
|
$
|
7,756
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
3,320
|
|
|
|
41.2
|
|
|
|
3,076
|
|
|
|
39.6
|
|
Supplies
|
|
|
1,295
|
|
|
|
16.1
|
|
|
|
1,251
|
|
|
|
16.1
|
|
Other operating expenses
|
|
|
1,326
|
|
|
|
16.4
|
|
|
|
1,226
|
|
|
|
15.9
|
|
Provision for doubtful accounts
|
|
|
775
|
|
|
|
9.6
|
|
|
|
788
|
|
|
|
10.2
|
|
Equity in earnings of affiliates
|
|
|
(73
|
)
|
|
|
(0.9
|
)
|
|
|
(75
|
)
|
|
|
(1.0
|
)
|
Depreciation and amortization
|
|
|
358
|
|
|
|
4.5
|
|
|
|
355
|
|
|
|
4.6
|
|
Interest expense
|
|
|
520
|
|
|
|
6.4
|
|
|
|
530
|
|
|
|
6.8
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
|
|
|
|
91
|
|
|
|
1.2
|
|
Loss on retirement of debt
|
|
|
75
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,596
|
|
|
|
94.2
|
|
|
|
7,242
|
|
|
|
93.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
467
|
|
|
|
5.8
|
|
|
|
514
|
|
|
|
6.6
|
|
Provision for income taxes
|
|
|
147
|
|
|
|
1.8
|
|
|
|
136
|
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
320
|
|
|
|
4.0
|
|
|
|
378
|
|
|
|
4.9
|
|
Net income attributable to noncontrolling interests
|
|
|
91
|
|
|
|
1.2
|
|
|
|
85
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Holdings, Inc.
|
|
$
|
229
|
|
|
|
2.8
|
|
|
$
|
293
|
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.43
|
|
|
|
|
|
|
$
|
0.67
|
|
|
|
|
|
Shares used in computing diluted earnings per share (000)
|
|
|
538,557
|
|
|
|
|
|
|
|
437,104
|
|
|
|
|
|
S-39
HCA Holdings,
Inc.
Condensed Consolidated Income Statements
For the Six Months Ended June 30, 2011 and 2010
(Dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Revenues
|
|
$
|
16,118
|
|
|
|
100.0
|
%
|
|
$
|
15,300
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
6,615
|
|
|
|
41.0
|
|
|
|
6,148
|
|
|
|
40.2
|
|
Supplies
|
|
|
2,570
|
|
|
|
15.9
|
|
|
|
2,451
|
|
|
|
16.0
|
|
Other operating expenses
|
|
|
2,648
|
|
|
|
16.5
|
|
|
|
2,428
|
|
|
|
15.9
|
|
Provision for doubtful accounts
|
|
|
1,424
|
|
|
|
8.8
|
|
|
|
1,352
|
|
|
|
8.8
|
|
Equity in earnings of affiliates
|
|
|
(149
|
)
|
|
|
(0.9
|
)
|
|
|
(143
|
)
|
|
|
(0.9
|
)
|
Depreciation and amortization
|
|
|
716
|
|
|
|
4.5
|
|
|
|
710
|
|
|
|
4.7
|
|
Interest expense
|
|
|
1,053
|
|
|
|
6.5
|
|
|
|
1,046
|
|
|
|
6.8
|
|
Losses on sales of facilities
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
|
|
|
|
109
|
|
|
|
0.7
|
|
Loss on retirement of debt
|
|
|
75
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
Termination of management agreement
|
|
|
181
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,134
|
|
|
|
93.9
|
|
|
|
14,101
|
|
|
|
92.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
984
|
|
|
|
6.1
|
|
|
|
1,199
|
|
|
|
7.8
|
|
Provision for income taxes
|
|
|
330
|
|
|
|
2.0
|
|
|
|
345
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
654
|
|
|
|
4.1
|
|
|
|
854
|
|
|
|
5.6
|
|
Net income attributable to noncontrolling interests
|
|
|
185
|
|
|
|
1.2
|
|
|
|
173
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Holdings, Inc.
|
|
$
|
469
|
|
|
|
2.9
|
|
|
$
|
681
|
|
|
|
4.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.94
|
|
|
|
|
|
|
$
|
1.56
|
|
|
|
|
|
Shares used in computing diluted earnings per share (000)
|
|
|
500,463
|
|
|
|
|
|
|
|
436,392
|
|
|
|
|
|
S-40
HCA Holdings,
Inc.
Condensed Consolidated Balance Sheets
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2011
|
|
|
2010
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
539
|
|
|
$
|
553
|
|
|
$
|
411
|
|
Accounts receivable, net
|
|
|
3,946
|
|
|
|
4,060
|
|
|
|
3,832
|
|
Inventories
|
|
|
887
|
|
|
|
881
|
|
|
|
897
|
|
Deferred income taxes
|
|
|
894
|
|
|
|
916
|
|
|
|
931
|
|
Other
|
|
|
625
|
|
|
|
576
|
|
|
|
848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
6,891
|
|
|
|
6,986
|
|
|
|
6,919
|
|
Property and equipment, at cost
|
|
|
26,338
|
|
|
|
25,855
|
|
|
|
25,641
|
|
Accumulated depreciation
|
|
|
(14,754
|
)
|
|
|
(14,508
|
)
|
|
|
(14,289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,584
|
|
|
|
11,347
|
|
|
|
11,352
|
|
Investments of insurance subsidiary
|
|
|
515
|
|
|
|
590
|
|
|
|
642
|
|
Investments in and advances to affiliates
|
|
|
843
|
|
|
|
852
|
|
|
|
869
|
|
Goodwill
|
|
|
2,719
|
|
|
|
2,705
|
|
|
|
2,693
|
|
Deferred loan costs
|
|
|
332
|
|
|
|
354
|
|
|
|
374
|
|
Other
|
|
|
993
|
|
|
|
975
|
|
|
|
1,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,877
|
|
|
$
|
23,809
|
|
|
$
|
23,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,297
|
|
|
$
|
1,348
|
|
|
$
|
1,537
|
|
Accrued salaries
|
|
|
1,009
|
|
|
|
975
|
|
|
|
895
|
|
Other accrued expenses
|
|
|
1,283
|
|
|
|
1,398
|
|
|
|
1,245
|
|
Long-term debt due within one year
|
|
|
689
|
|
|
|
546
|
|
|
|
592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
4,278
|
|
|
|
4,267
|
|
|
|
4,269
|
|
Long-term debt
|
|
|
24,631
|
|
|
|
24,820
|
|
|
|
27,633
|
|
Professional liability risks
|
|
|
987
|
|
|
|
1,003
|
|
|
|
995
|
|
Income taxes and other liabilities
|
|
|
1,515
|
|
|
|
1,507
|
|
|
|
1,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
31,411
|
|
|
|
31,597
|
|
|
|
34,505
|
|
Equity securities with contingent redemption rights
|
|
|
|
|
|
|
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
HCA Holdings, Inc. stockholders deficit
|
|
|
(8,681
|
)
|
|
|
(8,930
|
)
|
|
|
(11,926
|
)
|
Noncontrolling interests
|
|
|
1,147
|
|
|
|
1,142
|
|
|
|
1,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deficit
|
|
|
(7,534
|
)
|
|
|
(7,788
|
)
|
|
|
(10,794
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,877
|
|
|
$
|
23,809
|
|
|
$
|
23,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-41
HCA Holdings,
Inc.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2011 and 2010
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
654
|
|
|
$
|
854
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities
|
|
|
(1,576
|
)
|
|
|
(1,698
|
)
|
Provision for doubtful accounts
|
|
|
1,424
|
|
|
|
1,352
|
|
Depreciation and amortization
|
|
|
716
|
|
|
|
710
|
|
Income taxes
|
|
|
317
|
|
|
|
(111
|
)
|
Losses on sales of facilities
|
|
|
1
|
|
|
|
|
|
Impairments of long-lived assets
|
|
|
|
|
|
|
109
|
|
Loss on retirement of debt
|
|
|
75
|
|
|
|
|
|
Amortization of deferred loan costs
|
|
|
39
|
|
|
|
40
|
|
Share-based compensation
|
|
|
16
|
|
|
|
16
|
|
Other
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
1,666
|
|
|
|
1,295
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(776
|
)
|
|
|
(536
|
)
|
Acquisition of hospitals and health care entities
|
|
|
(168
|
)
|
|
|
(31
|
)
|
Disposition of hospitals and health care entities
|
|
|
54
|
|
|
|
25
|
|
Change in investments
|
|
|
76
|
|
|
|
502
|
|
Other
|
|
|
2
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(812
|
)
|
|
|
(51
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Issuance of long-term debt
|
|
|
|
|
|
|
1,387
|
|
Net change in revolving credit facilities
|
|
|
(1,524
|
)
|
|
|
1,329
|
|
Repayment of long-term debt
|
|
|
(1,508
|
)
|
|
|
(1,529
|
)
|
Distributions to noncontrolling interests
|
|
|
(185
|
)
|
|
|
(176
|
)
|
Distributions to stockholders
|
|
|
(30
|
)
|
|
|
(2,251
|
)
|
Payment of debt issuance costs
|
|
|
(12
|
)
|
|
|
(25
|
)
|
Issuance of common stock
|
|
|
2,506
|
|
|
|
|
|
Income tax benefits
|
|
|
49
|
|
|
|
56
|
|
Other
|
|
|
(22
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(726
|
)
|
|
|
(1,206
|
)
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
128
|
|
|
|
38
|
|
Cash and cash equivalents at beginning of period
|
|
|
411
|
|
|
|
312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
539
|
|
|
$
|
350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest payments
|
|
$
|
1,043
|
|
|
$
|
973
|
|
Income tax (refunds) payments, net
|
|
$
|
(36
|
)
|
|
$
|
400
|
|
S-42
HCA Holdings,
Inc.
Operating Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Consolidating Hospitals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Hospitals
|
|
|
157
|
|
|
|
154
|
|
|
|
157
|
|
|
|
154
|
|
Weighted Average Licensed Beds
|
|
|
39,356
|
|
|
|
38,607
|
|
|
|
39,209
|
|
|
|
38,647
|
|
Licensed Beds at End of Period
|
|
|
39,472
|
|
|
|
38,636
|
|
|
|
39,472
|
|
|
|
38,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Admissions
|
|
|
397,500
|
|
|
|
385,200
|
|
|
|
804,400
|
|
|
|
784,100
|
|
% Change
|
|
|
3.2
|
%
|
|
|
|
|
|
|
2.6
|
%
|
|
|
|
|
Equivalent Admissions
|
|
|
638,900
|
|
|
|
617,900
|
|
|
|
1,277,300
|
|
|
|
1,233,400
|
|
% Change
|
|
|
3.4
|
%
|
|
|
|
|
|
|
3.6
|
%
|
|
|
|
|
Revenue per Equivalent Admission
|
|
$
|
12,620
|
|
|
$
|
12,553
|
|
|
$
|
12,618
|
|
|
$
|
12,405
|
|
% Change
|
|
|
0.5
|
%
|
|
|
|
|
|
|
1.7
|
%
|
|
|
|
|
Inpatient Revenue per Admission
|
|
$
|
12,105
|
|
|
$
|
12,211
|
|
|
$
|
12,101
|
|
|
$
|
12,017
|
|
% Change
|
|
|
−0.9
|
%
|
|
|
|
|
|
|
0.7
|
%
|
|
|
|
|
Patient Days
|
|
|
1,889,600
|
|
|
|
1,858,100
|
|
|
|
3,869,800
|
|
|
|
3,810,700
|
|
Equivalent Patient Days
|
|
|
3,038,300
|
|
|
|
2,981,300
|
|
|
|
6,145,200
|
|
|
|
5,994,200
|
|
Inpatient Surgery Cases
|
|
|
120,200
|
|
|
|
121,800
|
|
|
|
239,900
|
|
|
|
244,300
|
|
% Change
|
|
|
−1.3
|
%
|
|
|
|
|
|
|
−1.8
|
%
|
|
|
|
|
Outpatient Surgery Cases
|
|
|
199,100
|
|
|
|
198,600
|
|
|
|
392,100
|
|
|
|
389,300
|
|
% Change
|
|
|
0.3
|
%
|
|
|
|
|
|
|
0.7
|
%
|
|
|
|
|
Emergency Room Visits
|
|
|
1,512,000
|
|
|
|
1,436,200
|
|
|
|
3,039,600
|
|
|
|
2,803,300
|
|
% Change
|
|
|
5.3
|
%
|
|
|
|
|
|
|
8.4
|
%
|
|
|
|
|
Outpatient Revenues as a Percentage of Patient Revenues
|
|
|
39.0
|
%
|
|
|
38.2
|
%
|
|
|
38.4
|
%
|
|
|
37.3
|
%
|
Average Length of Stay
|
|
|
4.8
|
|
|
|
4.8
|
|
|
|
4.8
|
|
|
|
4.9
|
|
Occupancy
|
|
|
52.8
|
%
|
|
|
52.9
|
%
|
|
|
54.5
|
%
|
|
|
54.5
|
%
|
Equivalent Occupancy
|
|
|
84.8
|
%
|
|
|
84.9
|
%
|
|
|
86.5
|
%
|
|
|
85.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Facility:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Admissions
|
|
|
391,800
|
|
|
|
384,800
|
|
|
|
795,800
|
|
|
|
782,300
|
|
% Change
|
|
|
1.8
|
%
|
|
|
|
|
|
|
1.7
|
%
|
|
|
|
|
Equivalent Admissions
|
|
|
628,900
|
|
|
|
617,300
|
|
|
|
1,262,200
|
|
|
|
1,229,800
|
|
% Change
|
|
|
1.9
|
%
|
|
|
|
|
|
|
2.6
|
%
|
|
|
|
|
Revenue per Equivalent Admission
|
|
$
|
12,573
|
|
|
$
|
12,515
|
|
|
$
|
12,564
|
|
|
$
|
12,383
|
|
% Change
|
|
|
0.5
|
%
|
|
|
|
|
|
|
1.5
|
%
|
|
|
|
|
Inpatient Revenue per Admission
|
|
$
|
12,094
|
|
|
$
|
12,224
|
|
|
$
|
12,104
|
|
|
$
|
12,029
|
|
% Change
|
|
|
−1.1
|
%
|
|
|
|
|
|
|
0.6
|
%
|
|
|
|
|
Inpatient Surgery Cases
|
|
|
119,200
|
|
|
|
121,100
|
|
|
|
237,800
|
|
|
|
242,600
|
|
% Change
|
|
|
−1.5
|
%
|
|
|
|
|
|
|
−2.0
|
%
|
|
|
|
|
Outpatient Surgery Cases
|
|
|
195,800
|
|
|
|
197,000
|
|
|
|
386,500
|
|
|
|
386,000
|
|
% Change
|
|
|
−0.6
|
%
|
|
|
|
|
|
|
0.1
|
%
|
|
|
|
|
Emergency Room Visits
|
|
|
1,494,800
|
|
|
|
1,430,900
|
|
|
|
3,011,500
|
|
|
|
2,793,200
|
|
% Change
|
|
|
4.5
|
%
|
|
|
|
|
|
|
7.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Consolidating and Nonconsolidating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Equity Joint Ventures) Hospitals:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidating
|
|
|
157
|
|
|
|
154
|
|
|
|
157
|
|
|
|
154
|
|
Nonconsolidating (Equity Joint Ventures)
|
|
|
7
|
|
|
|
8
|
|
|
|
7
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of Hospitals
|
|
|
164
|
|
|
|
162
|
|
|
|
164
|
|
|
|
162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-43
Results of
Operations
Revenues in the second quarter of 2011 increased to
$8.063 billion, from $7.756 billion in the second
quarter of 2010. Cash revenues totaled $7.288 billion in
the second quarter of 2011, compared to $6.968 billion in
the prior years second quarter. Cash revenues is a
non-GAAP financial measure and reflects our reported revenues
less the provision for doubtful accounts (bad debts). Revenue
growth was driven by increased volume and revenue per equivalent
admission growth. Revenues for the second quarter of 2011
included $39 million of Medicaid incentive revenues related
to certain of our hospitals completing attestations to their
adoption of certified electronic health record technology. Net
income attributable to HCA Holdings, Inc. totaled
$229 million, or $0.43 per diluted share, compared to
$293 million, or $0.67 per diluted share, in the second
quarter of 2010. Results for the second quarter of 2011 include
a loss on retirement of debt of $75 million, or $0.08 per
diluted share. Results for the second quarter of 2010 include
impairments of long-lived assets of $91 million, or $0.13
per diluted share. (All per diluted share
disclosures are based upon amounts net of the applicable income
taxes.) Shares used in computing diluted earnings per share
increased to 538.6 million in the second quarter of 2011
compared to 437.1 million in the second quarter of 2010.
The increase was due to the initial public offering of
87.7 million shares of our common stock in March of 2011.
Adjusted EBITDA declined to $1.420 billion compared to
$1.490 billion in the prior year period. Adjusted EBITDA is
a non-GAAP financial measure. Tables providing supplemental
information on adjusted EBITDA and cash revenues and reconciling
net income attributable to HCA Holdings, Inc. to adjusted
EBITDA, and reported revenues to cash revenues are set forth
below.
Our provision for doubtful accounts declined to
$775 million, or 9.6 percent of revenues, in the
second quarter of 2011, from $788 million, or
10.2 percent of revenues, in the same period of 2010. The
sum of the provision for doubtful accounts, uninsured discounts
and charity care, as a percentage of the sum of revenues,
uninsured discounts and charity care, was 27.6 percent for
the second quarter of 2011, compared to 26.1 percent for
the second quarter of 2010. Same facility uninsured admissions
increased 10.6 percent in the second quarter compared to
the prior year period and comprised 7.4 percent of total
same facility admissions compared to 6.8 percent of total
same facility admissions in the second quarter of 2010.
During the second quarter of 2011, salaries and benefits,
supplies and other operating expenses totaled
$5.941 billion, or 73.7 percent of revenues
(81.5 percent of cash revenues), compared to
$5.553 billion, or 71.6 percent of revenues
(79.7 percent of cash revenues), in the second quarter of
2010.
Revenues for the six months ended June 30, 2011 totaled
$16.118 billion compared to $15.300 billion in the
same period of 2010. Net income attributable to HCA Holdings,
Inc. was $469 million, or $0.94 per diluted share, compared
to $681 million, or $1.56 per diluted share, for the first
six months of 2010. Results for the six months ended
June 30, 2011 include a loss on retirement of debt of
$75 million, or $0.09 per diluted share, and a charge for
the termination of a management agreement of $181 million,
or $0.30 per diluted share. Results for the six months ended
June 30, 2010 include impairments of long-lived assets of
$109 million, or $0.16 per diluted share. Adjusted EBITDA
for the six months ended June 30, 2011 totaled
$3.010 billion compared to $3.064 billion in the prior
year period.
S-44
As of June 30, 2011, our balance sheet reflected cash and
cash equivalents of $539 million, total debt of
$25.320 billion, and total assets of $23.877 billion.
During the second quarter of 2011, capital expenditures totaled
$447 million, excluding acquisitions. Net cash provided by
operating activities in the second quarter of 2011 totaled
$748 million compared to $436 million in the prior
years second quarter. The improvement in cash flows from
operating activities was primarily due to lower tax payments
during the second quarter of 2011.
As of June 30, 2011, we operated 164 hospitals and 111
freestanding surgery centers (including seven hospitals and 13
freestanding surgery centers operated through equity method
joint ventures).
S-45
HCA Holdings,
Inc.
Supplemental Non-GAAP Disclosures
Operating Results Summary
(Dollars in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended
|
|
|
|
Second Quarter
|
|
|
June 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Revenues
|
|
$
|
8,063
|
|
|
$
|
7,756
|
|
|
$
|
16,118
|
|
|
$
|
15,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Holdings, Inc.
|
|
$
|
229
|
|
|
$
|
293
|
|
|
$
|
469
|
|
|
$
|
681
|
|
Losses on sales of facilities (net of tax)
|
|
|
1
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
Impairments of long-lived assets (net of tax)
|
|
|
−
|
|
|
|
57
|
|
|
|
|
|
|
|
69
|
|
Loss on retirement of debt (net of tax)
|
|
|
47
|
|
|
|
|
|
|
|
47
|
|
|
|
|
|
Termination of management agreement (net of tax)
|
|
|
−
|
|
|
|
|
|
|
|
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Holdings, Inc., excluding losses
on sales of facilities, impairments of long-lived assets, loss
on retirement of debt and termination of management agreement(a)
|
|
|
277
|
|
|
|
350
|
|
|
|
668
|
|
|
|
750
|
|
Depreciation and amortization
|
|
|
358
|
|
|
|
355
|
|
|
|
716
|
|
|
|
710
|
|
Interest expense
|
|
|
520
|
|
|
|
530
|
|
|
|
1,053
|
|
|
|
1,046
|
|
Provision for income taxes
|
|
|
174
|
|
|
|
170
|
|
|
|
388
|
|
|
|
385
|
|
Net income attributable to noncontrolling interests
|
|
|
91
|
|
|
|
85
|
|
|
|
185
|
|
|
|
173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(a)
|
|
$
|
1,420
|
|
|
$
|
1,490
|
|
|
$
|
3,010
|
|
|
$
|
3,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Holdings, Inc.
|
|
$
|
0.43
|
|
|
$
|
0.67
|
|
|
$
|
0.94
|
|
|
$
|
1.56
|
|
Losses on sales of facilities
|
|
|
−
|
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
Impairments of long-lived assets
|
|
|
−
|
|
|
|
0.13
|
|
|
|
|
|
|
|
0.16
|
|
Loss on retirement of debt
|
|
|
0.08
|
|
|
|
|
|
|
|
0.09
|
|
|
|
|
|
Termination of management agreement
|
|
|
−
|
|
|
|
|
|
|
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to HCA Holdings, Inc., excluding losses
on sales of facilities, impairments of long-lived assets, loss
on retirement of debt and termination of management agreement(a)
|
|
$
|
0.51
|
|
|
$
|
0.80
|
|
|
$
|
1.34
|
|
|
$
|
1.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing diluted earnings per share (000)
|
|
|
538,557
|
|
|
|
437,104
|
|
|
|
500,463
|
|
|
|
436,392
|
|
|
|
|
(a)
|
|
Net income attributable to HCA
Holdings, Inc., excluding losses on sales of facilities,
impairments of long-lived assets, loss on retirement of debt and
termination of management agreement and Adjusted EBITDA should
not be considered as measures of financial performance under
generally accepted accounting principles (GAAP). We
believe net income attributable to HCA Holdings, Inc., excluding
losses on sales of facilities, impairments of long-lived assets,
loss on retirement of debt and termination of management
agreement and Adjusted EBITDA are important measures that
supplement discussions and analysis of our results of
operations. We believe it is useful to investors to provide
disclosures of our results of operations on the same basis used
by management. Management relies upon net income attributable to
HCA Holdings, Inc., excluding losses on sales of facilities,
impairments of long-lived assets, loss on retirement of debt and
termination of management agreement and Adjusted EBITDA as the
primary measures to review and assess operating performance of
its hospital facilities and their management teams.
|
|
|
|
Management and investors review
both the overall performance (including net income attributable
to HCA Holdings, Inc., excluding losses on sales of facilities,
impairments of long-lived assets, loss on retirement of debt and
termination of management agreement and GAAP net income
attributable to HCA Holdings, Inc.) and operating performance
(Adjusted EBITDA) of our health care facilities. Adjusted EBITDA
and the Adjusted EBITDA margin (Adjusted EBITDA divided by
revenues) are utilized by management and investors to compare
our current operating results with the corresponding periods
during the previous year and to compare our operating results
with other companies in the health care industry. It is
reasonable to expect that losses on sales of facilities,
impairments of long-lived assets and loss on retirement of debt
will occur in future periods, but the amounts recognized can
vary significantly from period to period, do not directly relate
to the ongoing operations of our health care facilities and
complicate period comparisons of our results of operations and
operations comparisons with other health care companies.
|
|
|
|
Net income attributable to HCA
Holdings, Inc., excluding losses on sales of facilities,
impairments of long-lived assets, loss on retirement of debt and
termination of management agreement and Adjusted EBITDA are not
measures of financial performance under accounting principles
generally accepted in the United States, and should not be
considered as alternatives to net income attributable to HCA
Holdings, Inc. as a measure of operating performance or cash
flows from operating, investing and financing activities as a
measure of liquidity. Because net income attributable to HCA
Holdings, Inc., excluding losses on sales of facilities,
impairments of long-lived assets, loss on retirement of debt and
termination of management agreement and Adjusted EBITDA are not
measurements determined in accordance with generally accepted
accounting principles and are susceptible to varying
calculations, net income attributable to HCA Holdings, Inc.,
excluding losses on sales of facilities, impairments of
long-lived assets, loss on retirement of debt and termination of
management agreement and Adjusted EBITDA, as presented, may not
be comparable to other similarly titled measures presented by
other companies.
|
S-46
HCA Holdings,
Inc.
Supplemental Non-GAAP Disclosures
Operating Measures on a Cash Revenues Basis
Second Quarter
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
Non-GAAP
|
|
|
|
|
|
|
|
|
Non-GAAP
|
|
|
|
|
|
|
|
|
|
% of Cash
|
|
|
GAAP% of
|
|
|
|
|
|
% of Cash
|
|
|
GAAP% of
|
|
|
|
|
|
|
Revenues
|
|
|
Revenues
|
|
|
|
|
|
Revenues
|
|
|
Revenues
|
|
|
|
Amount
|
|
|
Ratios(b)
|
|
|
Ratios(b)
|
|
|
Amount
|
|
|
Ratios(b)
|
|
|
Ratios(b)
|
|
|
Revenues
|
|
$
|
8,063
|
|
|
|
|
|
|
|
100.0
|
|
|
$
|
7,756
|
|
|
|
|
|
|
|
100.0
|
|
Provision for doubtful accounts
|
|
|
775
|
|
|
|
|
|
|
|
|
|
|
|
788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash revenues(a)
|
|
|
7,288
|
|
|
|
100.0
|
|
|
|
|
|
|
|
6,968
|
|
|
|
100.0
|
|
|
|
|
|
Salaries and benefits
|
|
|
3,320
|
|
|
|
45.5
|
|
|
|
41.2
|
|
|
|
3,076
|
|
|
|
44.1
|
|
|
|
39.6
|
|
Supplies
|
|
|
1,295
|
|
|
|
17.8
|
|
|
|
16.1
|
|
|
|
1,251
|
|
|
|
17.9
|
|
|
|
16.1
|
|
Other operating expenses
|
|
|
1,326
|
|
|
|
18.2
|
|
|
|
16.4
|
|
|
|
1,226
|
|
|
|
17.7
|
|
|
|
15.9
|
|
% changes from prior year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
4.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash revenues
|
|
|
4.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash revenue per equivalent admission
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Cash revenues is defined as
reported revenues less the provision for doubtful accounts. We
use cash revenues as an analytical indicator for purposes of
assessing the effect of uninsured patient volumes, adjusted for
the effect of both the revenue deductions related to uninsured
accounts (charity care and uninsured discounts) and the
provision for doubtful accounts (which relates primarily to
uninsured accounts), on our revenues and certain operating
expenses, as a percentage of cash revenues. During the second
quarter of 2011, charity care increased $58 million,
uninsured discounts increased $270 million and the
provision for doubtful accounts declined $13 million,
compared to the second quarter of 2010. Cash revenues is
commonly used as an analytical indicator within the health care
industry. Cash revenues should not be considered as a measure of
financial performance under generally accepted accounting
principles (GAAP). Because cash revenues is not a
measurement determined in accordance with GAAP and is thus
susceptible to varying calculations, cash revenues, as
presented, may not be comparable to other similarly titled
measures of other health care companies.
|
|
(b)
|
|
Salaries and benefits, supplies and
other operating expenses, as a percentage of cash revenues (a
non-GAAP financial measure), present the impact on these ratios
due to the adjustment of deducting the provision for doubtful
accounts from reported revenues and results in these ratios
being non-GAAP financial measures. We believe these non-GAAP
financial measures are useful to investors to provide
disclosures of our results of operations on the same basis as
that used by management. Management uses this information to
compare certain operating expense categories as a percentage of
cash revenues. Management finds this information useful to
evaluate certain expense category trends without the influence
of whether adjustments related to revenues for uninsured
accounts are recorded as revenue adjustments (charity care and
uninsured discounts) or operating expenses (provision for
doubtful accounts), and thus the expense category trends are
generally analyzed as a percentage of cash revenues. These
non-GAAP financial measures should not be considered
alternatives to GAAP financial measures. We believe this
supplemental information provides management and the users of
our financial statements with useful information for
period-to-period
comparisons. Investors are encouraged to use GAAP measures when
evaluating our overall financial performance.
|
S-47
HCA Holdings,
Inc.
Supplemental Non-GAAP Disclosures
Operating Measures on a Cash Revenues Basis
For the Six Months Ended June 30, 2011 and 2010
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
Non-GAAP
|
|
|
|
|
|
|
|
|
Non-GAAP
|
|
|
|
|
|
|
|
|
|
% of Cash
|
|
|
GAAP% of
|
|
|
|
|
|
% of Cash
|
|
|
GAAP% of
|
|
|
|
|
|
|
Revenues
|
|
|
Revenues
|
|
|
|
|
|
Revenues
|
|
|
Revenues
|
|
|
|
Amount
|
|
|
Ratios(b)
|
|
|
Ratios(b)
|
|
|
Amount
|
|
|
Ratios(b)
|
|
|
Ratios(b)
|
|
|
Revenues
|
|
$
|
16,118
|
|
|
|
|
|
|
|
100.0
|
|
|
$
|
15,300
|
|
|
|
|
|
|
|
100.0
|
|
Provision for doubtful accounts
|
|
|
1,424
|
|
|
|
|
|
|
|
|
|
|
|
1,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash revenues(a)
|
|
|
14,694
|
|
|
|
100.0
|
|
|
|
|
|
|
|
13,948
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
6,615
|
|
|
|
45.0
|
|
|
|
41.0
|
|
|
|
6,148
|
|
|
|
44.1
|
|
|
|
40.2
|
|
Supplies
|
|
|
2,570
|
|
|
|
17.5
|
|
|
|
15.9
|
|
|
|
2,451
|
|
|
|
17.6
|
|
|
|
16.0
|
|
Other operating expenses
|
|
|
2,648
|
|
|
|
18.0
|
|
|
|
16.5
|
|
|
|
2,428
|
|
|
|
17.3
|
|
|
|
15.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% changes from prior year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash revenues
|
|
|
5.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue per equivalent admission
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash revenue per equivalent admission
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Cash revenues is defined as
reported revenues less the provision for doubtful accounts. We
use cash revenues as an analytical indicator for purposes of
assessing the effect of uninsured patient volumes, adjusted for
the effect of both the revenue deductions related to uninsured
accounts (charity care and uninsured discounts) and the
provision for doubtful accounts (which relates primarily to
uninsured accounts), on our revenues and certain operating
expenses, as a percentage of cash revenues. During the first six
months of 2011, charity care increased $148 million,
uninsured discounts increased $508 million and the
provision for doubtful accounts increased $72 million,
compared to the first six months of 2010. Cash revenues is
commonly used as an analytical indicator within the health care
industry. Cash revenues should not be considered as a measure of
financial performance under generally accepted accounting
principles (GAAP). Because cash revenues is not a
measurement determined in accordance with GAAP and is thus
susceptible to varying calculations, cash revenues, as
presented, may not be comparable to other similarly titled
measures of other health care companies.
|
|
(b)
|
|
Salaries and benefits, supplies and
other operating expenses, as a percentage of cash revenues (a
non-GAAP financial measure), present the impact on these ratios
due to the adjustment of deducting the provision for doubtful
accounts from reported revenues and results in these ratios
being non-GAAP financial measures. We believe these non-GAAP
financial measures are useful to investors to provide
disclosures of our results of operations on the same basis as
that used by management. Management uses this information to
compare certain operating expense categories as a percentage of
cash revenues. Management finds this information useful to
evaluate certain expense category trends without the influence
of whether adjustments related to revenues for uninsured
accounts are recorded as revenue adjustments (charity care and
uninsured discounts) or operating expenses (provision for
doubtful accounts), and thus the expense category trends are
generally analyzed as a percentage of cash revenues. These
non-GAAP financial measures should not be considered
alternatives to GAAP financial measures. We believe this
supplemental information provides management and the users of
our financial statements with useful information for
period-to-period
comparisons. Investors are encouraged to use GAAP measures when
evaluating our overall financial performance.
|
S-48
Description of
other indebtedness
The summaries set forth below are qualified in their entirety by
the actual text of the applicable agreements and indentures,
each of which has been filed as with the SEC and which may be
obtained on publicly available websites at the addresses set
forth under Available information.
Senior secured
credit facilities
The senior secured credit facilities provide senior secured
financing of $11.554 billion, consisting of:
|
|
|
$7.554 billion-equivalent in term loan facilities,
comprised of a $487 million senior secured term loan
A-1 facility
maturing on November 17, 2012, a $594 million senior
secured term loan
A-2 facility
maturing on May 2, 2016, a $1.689 billion senior
secured term loan B-1 facility maturing on November 17,
2013, a $2.000 billion senior secured term loan B-2
facility maturing on March 31, 2017, a $2.373 billion
senior secured term loan B-3 facility maturing on May 1,
2018 and a 291 million, or
$411 million-equivalent, senior secured European term loan
facility maturing on November 17, 2013; and
|
|
|
$4.000 billion in revolving credit facilities, comprised of
a $2.000 billion senior secured asset-based revolving
credit facility available in dollars maturing on
November 16, 2012 and a $2.000 billion senior secured
revolving credit facility available in dollars, euros and pounds
sterling currently maturing on November 17, 2015.
Availability under the asset-based revolving credit facility is
subject to a borrowing base of 85% of eligible accounts
receivable less customary reserves.
|
We refer to these senior secured credit facilities, excluding
the asset-based revolving credit facility, as the cash
flow credit facility and, collectively with the
asset-based revolving credit facility, the senior secured
credit facilities. The asset-based revolving credit
facility is documented in a separate loan agreement from the
other senior secured credit facilities.
HCA Inc. is the primary borrower under the senior secured credit
facilities, except that a U.K. subsidiary is the borrower under
the European term loan facility. The revolving credit facilities
include capacity available for the issuance of letters of credit
and for borrowings on
same-day
notice, referred to as the swingline loans. A portion of the
letter of credit availability under the cash-flow revolving
credit facility is available in euros and pounds sterling.
Lenders under the cash flow credit facility are subject to a
loss sharing agreement pursuant to which, upon the occurrence of
certain events, including a bankruptcy event of default under
the cash flow credit facility, each such lender will
automatically be deemed to have exchanged its interest in a
particular tranche of the cash flow credit facility for a pro
rata percentage in all of the tranches of the cash flow credit
facility.
On February 16, 2007, the cash flow credit facility was
amended to reduce the applicable margins with respect to the
term borrowings thereunder. On June 20, 2007, the
asset-based revolving credit facility was amended to reduce the
applicable margin with respect to borrowings thereunder.
On March 2, 2009, the cash flow credit facility was amended
to allow for one or more future issuances of additional secured
notes, which may include notes that are secured on a pari
passu basis or on a junior basis with the obligations under
the cash flow credit facility, so long as
S-49
(1) such notes do not require, subject to certain
exceptions, scheduled repayments, payment of principal or
redemption prior to the scheduled term loan B-1 maturity date,
(2) the terms of such notes, taken as a whole, are not more
restrictive than those in the cash flow credit facility and
(3) no subsidiary of HCA Inc. that is not a
U.S. guarantor is an obligor of such additional secured
notes, and such notes are not secured by any European collateral
securing the cash flow credit facility. The U.S. security
documents related to the cash flow credit facility were also
amended and restated in connection with the amendment in order
to give effect to the security interests to be granted to
holders of such additional secured notes.
On March 2, 2009, the asset-based revolving credit facility
was amended to allow for one or more future issuances of
additional secured notes or loans, which may include notes or
loans that are secured on a pari passu basis or on a
junior basis with the obligations under the cash flow credit
facility, so long as (1) such notes or loans do not
require, subject to certain exceptions, scheduled repayments,
payment of principal or redemption prior to the scheduled term
loan B-1 maturity date, (2) the terms of such notes or
loans, as applicable, taken as a whole, are not more restrictive
than those in the cash flow credit facility and (3) no
subsidiary of HCA Inc. that is not a U.S. guarantor is an
obligor of such additional secured notes. The amendment to the
asset-based revolving credit facility also altered the excess
facility availability requirement to include a separate minimum
facility availability requirement applicable to the asset-based
revolving credit facility and increased the applicable LIBOR and
asset-based revolving margins for all borrowings under the
asset-based revolving credit facility by 0.25% each.
On June 18, 2009, the cash flow credit facility was amended
to permit unlimited refinancings of the term loans initially
incurred in November 2006 under the cash flow credit facility
(the initial term loans), as well as any previously
incurred refinancing term loans through the incurrence of new
term loans under the cash flow credit facility
(refinancing term loans), (collectively, with the
initial term loans, the then-existing term loans),
and to permit the establishment of one or more series of
commitments under replacement cash flow revolvers under the cash
flow credit facility (replacement revolver) to
replace all or a portion of the revolving commitments initially
established in November 2006 under the cash flow credit facility
(the initial revolver) as well as any previously
issued replacement revolvers (with no more than three series of
revolving commitments to be outstanding at any time) in each
case, subject to the terms described below. The amendment to the
cash flow credit facility further permits the maturity date of
any then-existing term loan to be extended (any such loans so
extended, the extended term loans). The amendment to
the cash flow credit facility provides that:
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As to refinancing term loans, (1) the proceeds from such
refinancing term loans be used to repay in full the initial term
loans before being used to repay any previously issued
refinancing term loans; (2) the refinancing term loans
mature no earlier than the latest maturity date of any of the
initial term loans; (3) the weighted average life to
maturity for the refinancing term loans be no shorter than the
remaining weighted average life to maturity of the
tranche B term loan under the cash flow credit facility
measured at the time such refinancing term loans are incurred;
and (4) refinancing term loans will not share in mandatory
prepayments resulting from the creation or issuance of extended
term loans
and/or first
lien notes until the initial term loans are repaid in full but
will share in other mandatory prepayments such as those from
asset sales.
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As to replacement revolvers, terms of such replacement revolver
be substantially identical to the commitments being replaced,
other than with respect to maturity, size of any swingline loan
and/or
letter of credit subfacilities and pricing.
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As to extended term loans, (1) any offer to extend must be
made to all lenders under the term loan being extended, and, if
such offer is oversubscribed, the extension will be allocated
ratably to the lenders according to the respective amounts then
held by the accepting lenders; (2) each series of extended
term loans having the same interest margins, extension fees and
amortization schedule shall be a separate class of term loans;
and (3) extended term loans will not share in mandatory
prepayments resulting from the creation or issuance of
refinancing term loans
and/or first
lien notes until the initial term loans are repaid in full but
will share in other mandatory prepayments such as those from
asset sales.
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Any refinancing term loans and any obligations under replacement
revolvers will have a pari passu claim on the collateral
securing the initial term loans and the initial revolver.
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On April 6, 2010, the cash flow credit facility was amended
to (i) extend the maturity date for $2.0 billion of
the tranche B term loans from November 17, 2013 to
March 31, 2017 and (ii) increase the ABR margin and
LIBOR margin with respect to such extended term loans to 2.25%
and 3.25%, respectively. The maturity date, interest margins and
fees, as applicable, with respect to all other loans, and all
commitments and letters of credit, outstanding under the cash
flow credit facility remain unchanged.
On November 8, 2010, an amended and restated joinder
agreement was entered into with respect to the cash flow credit
facility to establish a new replacement revolving credit series,
which will mature on November 17, 2015. Under the amended
and restated joinder agreement, these replacement revolving
credit commitments became effective upon completion of our IPO.
On May 4, 2011, the cash flow credit facility and
asset-based revolving credit facility were amended and restated,
respectively, to, among other things, (i) permit HCA Inc.
and its restricted subsidiaries to issue new unsecured and
second lien notes so long as (x) HCA Inc. would be,
following such issuance, be in compliance with its maintenance
covenants under the respective credit facilities, (y) the
maturity of the new notes is later than the final maturity date
and (z) the covenants of the new notes are no more
restrictive than those under HCA Inc.s existing second
lien notes, (ii) allow HCA Inc. and its restricted
subsidiaries to issue new first lien notes and first lien term
loans, subject to a maximum first lien leverage ratio of 3.75 to
1.00, so long as (x) HCA Inc. complies with the same
covenant restrictions that apply to the issuance of new
unsecured and second lien notes described above and (y) the
maturity of the new first lien debt is later than the final
maturity date and (iii) revise the change of control
definition to provide that, in addition to acquiring, on a fully
diluted basis, at least 35% of HCA Inc.s voting stock, a
third party must also acquire, on a fully diluted basis,
ownership of HCA Inc.s voting stock greater than that then
held by those equity holders of HCA Holdings, Inc. that existed
prior to HCA Holdings, Inc.s initial public offering in
order to trigger a change of control.
In addition to the amendments described above, the asset-based
revolving credit facility was amended to (A) remove
restrictions on the prepayment of second lien, senior unsecured
or subordinated debt, and the making of restricted payments,
investments and dividends, subject to the satisfaction of
certain payment conditions, which include a minimum borrowing
availability, and a minimum consolidated EBITDA to consolidated
interest coverage ratio of 1.50 to 1.00 and (B) add a
general investment basket of $500.0 million which is not
subject to the payment conditions.
S-51
In addition to the amendments described above, the cash flow
credit facility was amended to (A) remove restrictions on
the prepayment of second lien, senior unsecured or subordinated
debt and (B) increase the general investment basket from
$1.5 billion to the greater of (i) $3.0 billion
or (ii) 12% of HCA Inc.s total assets.
The cash flow credit facility was also amended to
(i) extend the maturity date of $594 million of HCA
Inc.s term loan A facility from November 17, 2012 to
May 2, 2016 and increases the ABR margin and LIBOR margin
with respect to such extended term loans to 1.50% and 2.50%,
respectively and (ii) extend the maturity date of
$537 million of HCA Inc.s term loan A facility from
November 17, 2012 to May 1, 2018 and
$1.836 billion of HCA Inc.s term loan B-1 facility
from November 17, 2013 to May 1, 2018 and increase the
ABR margin and LIBOR margin with respect to such extended term
loans to 2.25% and 3.25%, respectively.
See also Underwriting (conflicts of interest) for a
description of certain relationships between us and Bank of
America, N.A., the administrative agent under the cash flow
credit facility and the asset-based revolving credit facility.
Interest rate and
fees
Borrowings under the senior secured credit facilities bear
interest at a rate equal to, at HCA Inc.s option,
either (a) LIBOR for deposits in the applicable currency
plus an applicable margin or (b) the higher of (1) the
prime rate of Bank of America, N.A. and (2) the federal
funds effective rate plus 0.50%, plus an applicable margin. The
applicable margins in effect for borrowings as of March 31,
2011 are (i) under the asset-based revolving credit
facility, 0.25% with respect to base rate borrowings and 1.25%
with respect to LIBOR borrowings, (ii) under the senior
secured revolving credit facility, 0.50% with respect to base
rate borrowings and 1.50% with respect to LIBOR borrowings,
(iii) under the term loan
A-1
facility, 0.25% with respect to base rate borrowings and 1.25%
with respect to LIBOR borrowings, (iv) under the term loan
A-2
facility, 1.50% with respect to base rate borrowings and 2.50%
with respect to LIBOR borrowings, (v) under the term loan
B-1 facility, 1.25% with respect to base rate borrowings and
2.25% with respect to LIBOR borrowings, (vi) under the term
loan B-2 facility and term loan B-3 facility, 2.25% with respect
to base rate borrowings and 3.25% with respect to LIBOR
borrowings, and (vii) under the European term loan
facility, 2.00% with respect to LIBOR borrowings. Certain of the
applicable margins may be reduced or increased depending on HCA
Inc.s leverage ratios.
In addition to paying interest on outstanding principal under
the senior secured credit facilities, HCA Inc. is required to
pay a commitment fee to the lenders under the revolving credit
facilities in respect of the unutilized commitments thereunder.
The commitment fee rate as of March 31, 2011 is 0.375% per
annum for the revolving credit facility and 0.25% for the
asset-based revolving credit facility. The commitment fee rates
may fluctuate due to changes in specified leverage ratios. HCA
Inc. must also pay customary letter of credit fees.
Prepayments
The cash flow credit facility requires HCA Inc. to prepay
outstanding term loans, subject to certain exceptions, with:
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50% (which percentage will be reduced to 25% if HCA Inc.s
total leverage ratio is 5.50x or less and to 0% if HCA
Inc.s total leverage ratio is 5.00x or less) of HCA
Inc.s annual excess cash flow;
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100% of the compensation for any casualty event, proceeds from
permitted sale-leasebacks and the net cash proceeds of all
nonordinary course asset sales or other dispositions of
property, other than the Receivables Collateral, as defined
below, if HCA Inc. does not (1) reinvest or commit to
reinvest those proceeds in assets to be used in our business or
to make certain other permitted investments within
15 months as long as, in the case of any such commitment to
reinvest or make certain other permitted investments, such
investment is completed within such
15-month
period or, if later, within 180 days after such commitment
is made or (2) apply such proceeds within 15 months to
repay debt of HCA Inc. that was outstanding on the effective
date of the Recapitalization scheduled to mature prior to the
earliest final maturity of the senior secured credit facilities
then outstanding; and
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100% of the net cash proceeds of any incurrence of debt, other
than proceeds from the receivables facilities and other debt
permitted under the senior secured credit facilities.
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The foregoing mandatory prepayments are applied among the term
loan facilities (1) during the first three years after the
effective date of the Recapitalization, pro rata to such
facilities based on the respective aggregate amounts of unpaid
principal installments thereof due during such period, with
amounts allocated to each facility being applied to the
remaining installments thereof in direct order of maturity and
(2) thereafter, pro rata to such facilities, with amounts
allocated to each facility being applied pro rata among the term
loan A-1
facility, term loan
A-2
facility, the term loan B-1 facility, the term loan B-2
facility, term loan B-3 facility and the European term loan
facility based upon the applicable remaining repayment amounts
due thereunder. Notwithstanding the foregoing, (i) proceeds
of asset sales by foreign subsidiaries are applied solely to
prepay European term loans until such term loans have been
repaid in full and (ii) HCA Inc. is not required to prepay
loans under the term loan A facility or the term loan B facility
with net cash proceeds of asset sales or with excess cash flow,
in each case attributable to foreign subsidiaries, to the extent
that the repatriation of such amounts is prohibited or delayed
by applicable local law or would result in material adverse tax
consequences.
The asset-based revolving credit facility requires HCA Inc. to
prepay outstanding loans if borrowings exceed the borrowing base.
HCA Inc. may voluntarily repay outstanding loans under the
senior secured credit facilities at any time without premium or
penalty, other than customary breakage costs with
respect to LIBOR loans.
Amortization
HCA Inc. is required to repay the loans under the term loan
facilities as follows:
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the term loan
A-1 facility
amortizes in quarterly installments such that the aggregate
amount of the original funded principal amount of such facility
repaid pursuant to such amortization payments in each year, with
the quarter ending June 30, 2011, is equal to
$14.68 million in the first quarter, $57.39 million in
the following two quarters, $215.20 million in the
following three quarters and with the balance being payable on
the final maturity date of such term loans;
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the term loan
A-2 facility
amortizes in equal quarterly installments that commenced on
June 30, 2011 in aggregate annual amounts equal to 1.25% of
the amount outstanding, on the restatement effective date of
such facility, with the balance being payable on the final
maturity date of such term loans;
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S-53
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each of the term loan B-1 facility and the European term loan
facility currently has no remaining amortization payments,with
the balance being payable on the final maturity date of such
term loans;
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the term loan B-2 facility amortizes in equal quarterly
installments commencing December 31, 2013 in aggregate
annual amounts equal to $5 million, with the balance
payable on the final maturity date of such term loans; and
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the term loan B-3 facility amortizes in equal quarterly
installments commencing December 31, 2013 in aggregate
annual amounts equal to 0.25% of the amount outstanding, on the
restatement effective date of such facility, with the balance
being payable on the final maturity date of such term loans.
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Principal amounts outstanding under the revolving credit
facilities are due and payable in full at maturity.
Guarantee and
security
All obligations under the senior secured credit facilities are
unconditionally guaranteed by substantially all existing and
future, direct and indirect, wholly-owned material domestic
subsidiaries that are unrestricted subsidiaries under the 1993
Indenture (except for certain special purpose subsidiaries that
only guarantee and pledge their assets under the asset-based
revolving credit facility), and the obligations under the
European term loan facility are also unconditionally guaranteed
by HCA Inc. and each of its existing and future wholly-owned
material subsidiaries formed under the laws of England and
Wales, subject, in each of the foregoing cases, to any
applicable legal, regulatory or contractual constraints and to
the requirement that such guarantee does not cause adverse tax
consequences.
All obligations under the asset-based revolving credit facility,
and the guarantees of those obligations, are secured, subject to
permitted liens and other exceptions, by a first-priority lien
on substantially all of the receivables of the borrowers and
each guarantor under such asset-based revolving credit facility
(the Receivables Collateral).
All obligations under the cash flow credit facility and the
guarantees of such obligations, are secured, subject to
permitted liens and other exceptions, by:
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a first-priority lien on the capital stock owned by HCA Inc. or
by any U.S. guarantor in each of their respective
first-tier subsidiaries (limited, in the case of foreign
subsidiaries, to 65% of the voting stock of such subsidiaries);
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a first-priority lien on substantially all present and future
assets of HCA Inc. and of each U.S. guarantor other than
(i) Principal Properties (as defined in the
1993 Indenture), except for certain Principal
Properties the aggregate amount of indebtedness secured
thereby in respect of the cash flow credit facility and the
first lien notes and any future first lien obligations, taken as
a whole, do not exceed 10% of Consolidated Net Tangible
Assets (as defined under the 1993 Indenture),
(ii) certain other real properties and (iii) deposit
accounts, other bank or securities accounts, cash, leaseholds,
motor-vehicles and certain other exceptions (such collateral
under this and the preceding bullet, the Non-Receivables
Collateral); and
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a second-priority lien on certain of the Receivables Collateral
(such portion of the Receivables Collateral, the Shared
Receivables Collateral; the Receivables Collateral that
does not secure
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S-54
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such cash flow credit facility on a second-priority basis is
referred to as the Separate Receivables Collateral).
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The obligations of the borrowers and the guarantors under the
European term loan facility are also secured by substantially
all present and future assets of the European subsidiary
borrower and each European guarantor (the European
Collateral), subject to permitted liens and other
exceptions (including, without limitation, exceptions for
deposit accounts, other bank or securities accounts, cash,
leaseholds, motor-vehicles and certain other exceptions) and
subject to such security interests otherwise being permitted by
applicable law and contract and not resulting in adverse tax
consequences. Neither our first lien notes nor our second lien
notes are secured by any of the European Collateral.
Certain covenants
and events of default
The senior secured credit facilities contain a number of
covenants that, among other things, restrict, subject to certain
exceptions, HCA Inc.s ability and the ability of its
restricted subsidiaries to:
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incur additional indebtedness;
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create liens;
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enter into sale and leaseback transactions;
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engage in mergers or consolidations;
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sell or transfer assets;
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pay dividends and distributions or repurchase capital stock;
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make investments, loans or advances;
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with respect to the asset-based revolving credit facility,
prepay certain subordinated indebtedness, the second lien notes
and certain other indebtedness existing on the effective date of
the Recapitalization (Retained Indebtedness),
subject to certain exceptions;
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make certain acquisitions;
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engage in certain transactions with affiliates;
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make certain material amendments to agreements governing certain
subordinated indebtedness, the second lien notes or Retained
Indebtedness; and
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change lines of business.
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In addition, the senior secured credit facilities require the
following financial covenants to be maintained:
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in the case of the asset-based revolving credit facility, a
minimum interest coverage ratio (applicable only when
availability under such facility is less than 10% of the
borrowing base thereunder); and
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in the case of the other senior secured credit facilities, a
maximum total leverage ratio.
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S-55
The senior secured credit facilities also contain certain
customary affirmative covenants and events of default, including
a change of control.
Senior secured
notes
Overview of
senior secured first lien notes
As of March 31, 2011, HCA Inc. had $4.150 billion aggregate
principal amount of senior secured first lien notes consisting
of:
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$1.500 billion aggregate principal amount of
81/2% senior
secured notes due 2019 issued on April 22, 2009 at a price
of 96.755% of their face value, resulting in $1.451 billion
of gross proceeds;
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$1.250 billion aggregate principal amount of
77/8% senior
secured notes due 2020 issued on August 11, 2009 at a price
of 98.254% of their face value, resulting in $1.228 billion
of gross proceeds; and
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$1.400 billion aggregate principal amount of
71/4% senior
secured first lien notes due 2020 issued on March 10, 2010
at a price of 99.095% of their face value, resulting in
$1.387 billion of gross proceeds.
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We refer to these notes issued on April 22, 2009,
August 11, 2009 and March 10, 2010 as the first
lien notes and the indentures governing the first lien
notes as the first lien indentures.
The first lien notes and the related guarantees are secured by
first-priority liens, subject to permitted liens, on HCA
Inc.s subsidiary guarantors assets, subject to
certain exceptions, that secure HCA Inc.s cash flow credit
facility on a first-priority basis and are secured by
second-priority liens, subject to permitted liens, on HCA
Inc.s subsidiary guarantors assets that secure HCA
Inc.s asset-based revolving credit facility on a
first-priority basis and HCA Inc.s cash flow credit
facility on a second-priority basis.
Overview of
senior secured second lien notes
As of March 31, 2011, HCA Inc. had $6.088 billion
aggregate principal amount of senior secured second lien notes
consisting of:
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$1.000 billion aggregate principal amount of
91/8%
second lien notes due 2014;
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$3.200 billion aggregate principal amount of
91/4% second
lien notes due 2016;
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$1.578 billion aggregate principal amount of
95/8%
cash/103/8%
pay-in-kind
second lien toggle notes due 2016, which toggle notes allow us,
at HCA Inc.s option, to pay interest in-kind during the
first five years at the higher interest rate of
103/8%.
HCA Inc. elected in November 2008 to pay interest in-kind in the
amount of $78 million for the interest period ending in May
2009; and
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$310 million aggregate principal amount of
97/8% senior
secured notes due 2017.
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We refer to these notes as the second lien notes
and, together with the first lien notes, the secured
notes. We refer to the indentures governing the second
lien notes as the second lien indentures and,
together with the first lien indentures, the indentures
governing the secured notes.
S-56
These second lien notes and the related guarantees are secured
by second-priority liens, subject to permitted liens, on HCA
Inc.s subsidiary guarantors assets, subject to
certain exceptions, that secure the cash flow credit facility on
a first-priority basis and are secured by third-priority liens,
subject to permitted liens, on HCA Inc.s and its
subsidiary guarantors assets that secure the asset-based
revolving credit facility on a first-priority basis and the cash
flow credit facility on a second-priority basis.
Optional
redemption
The indentures governing the secured notes permit HCA Inc. to
redeem some or all of the secured notes at any time at
redemption prices described or set forth in the respective
indenture. In particular, in the event of an equity offering,
HCA Inc. may, for approximately three years following the date
of issuance of that series, redeem up to 35% of the principal
amount of such series at a redemption price equal to 100% plus
the amount of the respective coupon, using the net cash proceeds
raised in the equity offering.
Change of
control
In addition, the indentures governing the secured notes provide
that, upon the occurrence of a change of control as defined
therein, each holder of secured notes has the right to require
us to repurchase some or all of such holders secured notes
at a purchase price in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the
repurchase date.
Covenants
The indentures governing the secured notes contain covenants
limiting, among other things, HCA Inc.s ability and the
ability of its restricted subsidiaries to, subject to certain
exceptions:
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incur additional debt or issue certain preferred stock;
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pay dividends on or make certain distributions of our capital
stock or make other restricted payments;
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create certain liens or encumbrances;
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sell certain assets;
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enter into certain transactions with affiliates;
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make certain investments; and
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consolidate, merge, sell or otherwise dispose of all or
substantially all of our assets.
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The indentures governing the secured notes also contain a
covenant limiting HCA Inc.s ability to prepay certain
series of unsecured notes based on the maturity of those
unsecured notes. In particular, the indenture governing the
first lien notes issued in April 2009 permits HCA Inc. to prepay
only those unsecured notes maturing on or prior to
April 15, 2019, the indenture governing the first lien
notes issued in August 2009 permits HCA Inc. to prepay only
those unsecured notes maturing on or prior to February 15,
2020 and the indentures governing the notes issued in November
2006 and in February 2009 permit HCA Inc. to prepay only those
unsecured notes maturing on or prior to November 15, 2016.
S-57
Events of
default
The indentures governing the secured notes also provide for
events of default which, if any of them occurs, would permit or
require the principal of and accrued interest on the secured
notes to become or to be declared due and payable.
Other secured
indebtedness
As of March 31, 2011, HCA Inc. had approximately
$314 million of capital leases and other secured debt
outstanding.
Under the lease with HRT of Roanoke, Inc., effective
December 20, 2005, HCA Inc. makes annual payments for rent
and additional expenses for the use of premises in Roanoke and
Salem, Virginia. The rent payments will increase each year
beginning January 1, 2007 by the lesser of 3% or the change
in the Consumer Price Index. The lease is for a fixed term of
12 years with the option to extend the lease for another
ten years.
Under the lease with Medical City Dallas Limited, effective
March 18, 2004, HCA Inc. makes annual payments for rent for
the use of premises that are a part of a complex known as
Medical City Dallas located in Dallas, Texas. The
rent payment is adjusted yearly based on the fair market value
of the premises and a capitalization rate. The initial term is
240 months with the option to extend for two more terms of
240 months each.
Unsecured
indebtedness
As of March 31, 2011, HCA Inc. had outstanding an aggregate
principal amount of $5.580 billion of senior notes and
debentures, consisting of the following series:
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$402,499,000 aggregate principal amount of 6.95% Senior
Notes due 2012;
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$500,000,000 aggregate principal amount of 6.30% Senior
Notes due 2012;
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$500,000,000 aggregate principal amount of 6.25% Senior
Notes due 2013;
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$500,000,000 aggregate principal amount of 6.75% Senior
Notes due 2013;
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$500,000,000 aggregate principal amount of 5.75% Senior
Notes due 2014;
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$750,000,000 aggregate principal amount of 6.375% Senior
Notes due 2015;
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$1,000,000,000 aggregate principal amount of 6.50% Senior
Notes due 2016;
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$291,436,000 aggregate principal amount of 7.69% Senior
Notes due 2025;
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$250,000,000 aggregate principal amount of 7.50% Senior
Notes due 2033;
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$150,000,000 aggregate principal amount of 7.19% Debentures
due 2015;
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$135,645,000 aggregate principal amount of 7.50% Debentures
due 2023;
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$150,000,000 aggregate principal amount of 8.36% Debentures
due 2024;
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$150,000,000 aggregate principal amount of 7.05% Debentures
due 2027;
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$100,000,000 aggregate principal amount of 7.75% Debentures
due 2036; and
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$200,000,000 aggregate principal amount of 7.50% Debentures
due 2095.
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As of March 31, 2011, we also had outstanding $121,110,000
aggregate principal amount of HCA Inc.s 9.00% Medium Term
Notes due 2014 and $125,000,000 aggregate principal amount of
HCA Inc.s 7.58% Medium Term Notes due 2025.
S-58
All of HCA Inc.s outstanding series of senior notes,
debentures and medium term notes, which we refer to collectively
as the unsecured notes, were issued under an
indenture, which we refer to as the 1993 Indenture.
Optional
redemption
If permitted by the respective supplemental indenture, HCA Inc.
is permitted to redeem some or all of that series of unsecured
notes at any time at redemption prices described or set forth in
such supplemental indenture.
Covenants
The 1993 Indenture contains covenants limiting, among other
things, HCA Inc.s ability
and/or the
ability of HCA Inc.s restricted subsidiaries to (subject
to certain exceptions):
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assume or guarantee indebtedness or obligation secured by
mortgages, liens, pledges or other encumbrances;
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enter into sale and lease-back transactions with respect to any
Principal Property (as such term is defined in the
1993 Indenture);
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create, incur, issue, assume or otherwise become liable with
respect to, extend the maturity of, or become responsible for
the payment of, any debt or preferred stock; and
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consolidate, merge, sell or otherwise dispose of all or
substantially all of HCA Inc.s assets.
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In addition, the 1993 Indenture provides that the aggregate
amount of all other indebtedness of HCA Inc. secured by
mortgages on Principal Properties (as such term is
defined in the 1993 Indenture) together with the aggregate
principal amount of all indebtedness of restricted subsidiaries
(as such term is defined in the 1993 Indenture) and the
attributable debt in respect of sale-leasebacks of Principal
Properties, may not exceed 15% of the consolidated net tangible
assets of HCA Inc. and its consolidated subsidiaries, subject to
exceptions for certain permitted mortgages and debt.
Events of
default
The 1993 Indenture contains certain events of default, which, if
any of them occurs, would permit or require the principal of and
accrued interest on such series to become or to be declared due
and payable.
Unsecured
indebtedness of HCA Holdings, Inc.
Overview
On November 23, 2010, HCA Holdings, Inc. issued
$1.525 billion aggregate principal amount of
73/4% senior
notes due 2021 at a price of 100% of their face value, resulting
in $1.525 billion of gross proceeds. We refer to these
notes as the outstanding 2021 notes and the
indenture governing the outstanding 2021 notes as the 2021
notes indenture.
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Ranking
The outstanding 2021 notes are HCA Holdings senior
unsecured obligations and rank equally in right of payment with
all of its future unsecured and unsubordinated indebtedness,
rank senior in right of payment to any of its future
subordinated indebtedness, and are structurally subordinated in
right of payment to indebtedness of HCA Holdings, Inc.s
subsidiaries, including HCA Inc. The outstanding 2021 notes are
not guaranteed by any of HCA Holdings, Inc.s subsidiaries,
including HCA Inc. HCA Holdings, Inc.s future secured
indebtedness and other future secured obligations will be
effectively senior to the outstanding 2021 notes to the extent
of the value of the assets securing such other indebtedness and
other obligations.
Optional
redemption
The 2021 notes indenture permits HCA Holdings, Inc. to redeem
some or all of the outstanding 2021 notes at any time at
redemption prices described or set forth in the respective
indenture. In particular, in the event of an equity offering,
HCA Holdings, Inc. may, until November 15, 2013, redeem up
to 35% of the principal amount of the outstanding 2021 notes at
a redemption price equal to 107.750% of their face value, using
the net cash proceeds raised in the equity offering.
Change of
control
Upon the occurrence of a change of control, which is defined in
the 2021 notes indenture, each holder of the outstanding 2021
notes has the right to require HCA Holdings, Inc. to repurchase
some or all of such holders notes at a purchase price in
cash equal to 101% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the repurchase date.
Covenants
The 2021 notes indenture contains covenants limiting, among
other things, HCA Holdings, Inc.s ability and the ability
of its restricted subsidiaries to (subject to certain
exceptions):
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create liens on certain assets to secure debt;
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enter into certain sale and lease-back transactions; and
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consolidate, merge, sell or otherwise dispose of all or
substantially all of HCA Holdings, Inc.s assets.
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Events of
default
The 2021 notes indenture contains certain events of default,
which, if any of them occurs, would permit or require the
principal of and accrued interest on the outstanding 2021 notes
to become or to be declared due and payable.
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Description of
the secured notes
The following description of the particular terms of the
6.50% Senior Secured Notes due 2020, which we refer to in
this description as the Notes, supplements,
and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the debt
securities set forth under Description of Debt Securities
and Guarantees in the attached prospectus. In this
description of the secured notes, all references to
we, us or our and the
Company are to HCA Inc. only (the
Issuer) and not to HCA Holdings, Inc.
(Holdings) or any of its Subsidiaries.
References in this description of the secured notes to
Holdings or the Parent Guarantor refer
only to Holdings and not to its Subsidiaries or the Issuer.
The Issuer will issue the Notes under an indenture, to be dated
as of August 1, 2011 among the Issuer, Holdings and Law
Debenture Trust Company of New York, as
Trustee and Deutsche Bank Trust Company
Americas, as Paying Agent, Registrar and Transfer Agent, as
supplemented by a supplemental indenture. The supplemental
indenture will set forth certain specific terms applicable to
the Notes, and references to the Indenture in
this description mean the Indenture as so amended and
supplemented by the supplemental indenture. This description is
intended to be an overview of the material provisions of the
Notes and the Indenture. This summary is not complete and is
qualified in its entirety by reference to the Indenture. You
should carefully read the summary below, the description of the
general terms and provisions of our debt securities set forth in
the accompanying base prospectus under Description of Debt
Securities and Guarantees and the provisions of the
Indenture that may be important to you before investing in the
Notes. Capitalized terms defined in the accompanying base
prospectus or in the Indenture have the same meanings when used
in this description unless updated herein. The terms of the
Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of
1939, as amended. You may request copies of the Indenture at the
address set forth under the heading Summary. A form
of the indenture has been filed as an exhibit to the
registration statement of which this prospectus supplement is a
part and can be obtained as indicated under Available
information.
Brief description
of notes
The Notes:
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will be general senior obligations of the Issuer;
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will be secured on a first-priority basis, equally and ratably
with all existing and future obligations of the Issuer and the
Guarantors under any existing and future First Lien Obligations,
by all of the assets of the Issuer and the Guarantors which
secure the General Credit Facility (other than the European
Collateral), subject to the Liens securing the Issuers and
the Guarantors ABL Obligations and other Permitted Liens;
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will be secured on a second-priority basis, equally and ratably
with all existing and future obligations of the Issuer and the
Guarantors under any existing and future First Lien Obligations,
by all of the assets of the Issuer and the Guarantors securing
the ABL Facility which also secure the General Credit Facility,
subject to the Liens securing the Issuers and the
Guarantors ABL Obligations and other Permitted Liens;
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will be effectively subordinated to the Issuers and the
Guarantors obligations under the ABL Facility, to the
extent of the value of the Shared Receivables Collateral;
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will be effectively subordinated to any obligations secured by
Permitted Liens, to the extent of the value of the assets of the
Issuer and the Guarantors subject to those Permitted Liens;
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will be structurally subordinated to any existing and future
indebtedness and liabilities of non-guarantor Subsidiaries,
including the ABL Financing Entities and the Issuers
Foreign Subsidiaries and any Unrestricted Subsidiaries and
including indebtedness under the Companys senior secured
European term loan facility included in the General Credit
Facility;
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will rank equally in right of payment with all existing and
future senior Indebtedness of the Issuer and the Guarantors but,
to the extent of the value of the Collateral, will be
effectively senior to all of the Issuers and the
Guarantors unsecured senior Indebtedness (including the
Existing Notes) and Junior Lien Obligations (including the
Existing Second Priority Notes);
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will be senior in right of payment to any future Subordinated
Indebtedness (as defined with respect to the Notes) of the
Issuer; and
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will be initially unconditionally guaranteed on a joint and
several and senior basis by each Restricted Subsidiary that
guarantees the General Credit Facility (other than any Foreign
Subsidiary).
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The Parent Guarantee (as described below) is:
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the unsecured obligation of Holdings (in such capacity, the
Parent Guarantor);
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equal in right of payment to with all of the Parent
Guarantors existing and future indebtedness that is not
subordinated in right of payment to its Parent Guarantee
(including the Parent Guarantors existing
73/4% senior
notes due 2021 and the guarantees given by the Parent Guarantor
in favor of the Unsecured Notes);
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senior in right of payment to any future Subordinated
Indebtedness of the Parent Guarantor;
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effectively subordinated in right of payment to all of the
Parent Guarantors future indebtedness that is secured by
Liens on its assets, to the extent of the value of the assets
securing such indebtedness; and
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structurally subordinated in right of payment to all
Indebtedness of the Parent Guarantors Subsidiaries (other
than the Issuer).
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Guarantees
The Guarantors, as primary obligors and not merely as sureties,
will initially jointly and severally fully and unconditionally
guarantee, on a senior basis, the performance and full and
punctual payment when due, whether at maturity, by acceleration
or otherwise, of all obligations of the Issuer under the
Indenture and the Notes, whether for payment of principal of,
premium, if any, or interest in respect of the Notes, expenses,
indemnification or otherwise, on the terms set forth in the
Indenture by executing the Indenture.
The Restricted Subsidiaries which guarantee the General Credit
Facility will initially guarantee the Notes. Each of the
Guarantees of the Notes will be a general senior obligation of
each Guarantor and will be secured by a first-priority lien on
all of the assets of each Guarantor which secure the General
Credit Facility (other than the European Collateral) and by a
second-priority lien on all of the assets of each Guarantor
which secure the ABL Facility. The Guarantees will rank equally
in right of payment with all existing and future senior
Indebtedness of the
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Guarantor but, to the extent of the value of the Collateral,
will be effectively senior to all of the Guarantors
unsecured senior Indebtedness and Junior Lien Obligations and,
to the extent of the Shared Receivables Collateral, will be
effectively subordinated to the Guarantors Obligations
under the ABL Facility and any future ABL Obligations. The
Guarantees will be senior in right of payment to all existing
and future Subordinated Indebtedness of each Guarantor. The
Notes will be structurally subordinated to Indebtedness and
other liabilities of Subsidiaries of the Issuer that do not
Guarantee the Notes.
Not all of the Issuers Subsidiaries will Guarantee the
Notes. In the event of a bankruptcy, liquidation or
reorganization of any of these non-guarantor Subsidiaries, the
non-guarantor Subsidiaries will pay the holders of their debt
and their trade creditors before they will be able to distribute
any of their assets to the Issuer. None of our Subsidiaries
which are Restricted Subsidiaries for
purposes of the Existing Notes Indenture, Foreign Subsidiaries,
ABL Financing Entities, non-Wholly Owned Subsidiaries or any
Receivables Subsidiaries will guarantee the Notes. For the three
months ended March 31, 2011, our non-guarantor Subsidiaries
accounted for approximately $3.477 billion, or 43.2%, of
our total revenues and approximately $689 million, or
43.3%, of our total Adjusted EBITDA. As of March 31, 2011,
our non-guarantor Subsidiaries accounted for approximately
$9.840 billion, or 41.3%, of our total assets and
approximately $5.969 billion, or 18.9%, of our total
liabilities.
The obligations of each Guarantor under its Guarantee will be
limited as necessary to prevent the Guarantee from constituting
a fraudulent conveyance under applicable law.
Any entity that makes a payment under its Guarantee will be
entitled upon payment in full of all guaranteed obligations
under the Indenture to a contribution from each other Guarantor
in an amount equal to such other Guarantors pro rata
portion of such payment based on the respective net assets of
all the Guarantors at the time of such payment determined in
accordance with GAAP.
If a Guarantee were rendered voidable, it could be subordinated
by a court to all other indebtedness (including guarantees and
other contingent liabilities) of the Guarantor, and, depending
on the amount of such indebtedness, a Guarantors liability
on its Guarantee could be reduced to zero. See Risk
factorsRisks related to the notesFederal and state
fraudulent transfer laws may permit a court to void the
guarantees, and, if that occurs, you may not receive any payment
on the notes.
Each Guarantee by a Guarantor will provide by its terms that it
will be automatically and unconditionally released and
discharged upon:
(1) (a) any sale, exchange or transfer (by merger or
otherwise) of the Capital Stock of such Guarantor (including any
sale, exchange or transfer), after which the applicable
Guarantor is no longer a Restricted Subsidiary or all or
substantially all the assets of such Guarantor, which sale,
exchange or transfer is made in compliance with the applicable
provisions of the Indenture;
(b) the release or discharge of the guarantee by such
Guarantor of the Senior Credit Facilities or such other
guarantee that resulted in the creation of such Guarantee,
except a discharge or release by or as a result of payment under
such guarantee;
(c) the designation of any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary in compliance with the
applicable provisions of the Indenture;
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(d) the occurrence of an Investment Grade Rating Event (as
described below); or
(e) the exercise by the Issuer of its legal defeasance
option or covenant defeasance option as described under
Defeasance or the discharge of the Issuers
obligations under the Indenture in accordance with the terms of
the Indenture; and
(2) such Guarantor delivering to the Trustee an
Officers Certificate and an Opinion of Counsel, each
stating that all conditions precedent provided for in the
Indenture relating to such transaction have been complied with.
Holding company
structure
The Issuer is a holding company for its Subsidiaries, with no
material operations of its own and only limited assets.
Accordingly, the Issuer is dependent upon the distribution of
the earnings of its Subsidiaries, whether in the form of
dividends, advances or payments on account of intercompany
obligations, to service its debt obligations.
Parent
guarantee
We are a Subsidiary of Holdings. Holdings will, as primary
obligor and not merely as surety, irrevocably and fully and
unconditionally guarantee (the Parent
Guarantee and Holdings in such capacity, the
Parent Guarantor), on an unsecured senior
basis, the punctual payment when due, whether at maturity, by
acceleration or otherwise, of all monetary obligations of the
Issuer under the Indenture and the Notes, whether for principal
of or interest on the Notes, expenses, indemnification or
otherwise (all such obligations guaranteed by the Parent
Guarantor being herein called the Parent Guaranteed
Obligations).
The Parent Guarantee shall be a continuing guarantee and shall
(i) subject to the next two paragraphs, remain in full
force and effect until payment in full of the principal amount
of all outstanding Notes (whether by payment at maturity,
purchase, redemption, defeasance, retirement or other
acquisition) and all other applicable Parent Guaranteed
Obligations of the Parent Guarantor then due and owing,
(ii) be binding upon the Parent Guarantor and
(iii) inure to the benefit of and be enforceable by the
Trustee, the Holders and their permitted successors, transferees
and assigns.
The Parent Guarantor will automatically and unconditionally be
released from all obligations under its Parent Guarantee, and
its Parent Guarantee will thereupon terminate and be discharged
and of no further force of effect, (i) upon any merger or
consolidation of such Parent Guarantor with the Issuer,
(ii) upon legal or covenant defeasance of the Issuers
obligations under, or satisfaction and discharge of, the
Indenture, or (iii) subject to customary contingent
reinstatement provisions, upon payment in full of the aggregate
principal amount of all Notes then outstanding and all other
applicable Parent Guaranteed Obligations of the Parent Guarantor
then due and owing.
Upon any such occurrence specified in the preceding paragraph,
the Trustee shall execute upon request by the Issuer, any
documents reasonably required in order to evidence such release,
discharge and termination in respect of the Parent Guarantee.
Neither the Issuer nor the Parent Guarantor shall be required to
make a notation on the Notes to reflect the Parent Guarantee or
any such release, termination or discharge.
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Security
General
The Notes and the Guarantees, together with all other First Lien
Obligations, will be secured by perfected first-priority
security interests in the Non-Receivables Collateral and by
perfected second-priority security interests in the Shared
Receivables Collateral (second in priority to the first-priority
Liens on the Shared Receivables Collateral securing the ABL
Obligations), in each case, subject to Permitted Liens.
Notwithstanding the foregoing, neither the Notes nor the
Guarantees will be secured by the European Collateral or the
Separate Receivables Collateral. The ABL Secured Parties have
rights and remedies with respect to the Shared Receivables
Collateral that, if exercised, could adversely affect the value
of the Shared Receivables Collateral or the ability of the
respective agents under the Intercreditor Agreements to realize
or foreclose on the Shared Receivables Collateral on behalf of
the First Lien Secured Parties. First Lien Secured Parties other
than the Holders of the Notes have rights and remedies with
respect to the Collateral that, if exercised, could also
adversely affect the value of the Collateral on behalf of the
Holders of the Notes, particularly the rights described below
under First lien intercreditor agreement. For
a description of the Shared Receivables Collateral and the
Non-Receivables Collateral, see Description of other
indebtednessSenior secured credit
facilitiesGuarantee and security.
The Security Documents will provide that the Company is
obligated to deliver to the First Lien Collateral Agent within
60 days of the Issue Date (a) counterparts of
amendments to the Mortgages securing the General Credit Facility
and the Existing First Priority Notes, duly executed and
delivered by the First Lien Collateral Agent and the record
owner of each applicable mortgaged property and otherwise
suitable for recording and in form and substance sufficient to
grant to the First Lien Collateral Agent for the benefit of the
First Lien Secured Parties a valid mortgage lien on such real
property and (b) title searches confirming that there are
no Liens of record in violation of the applicable Mortgage. In
connection with the delivery of the amendments to the Mortgages,
the Issuer is not required to cause the title insurance policies
insuring the existing Mortgages to be endorsed in favor of the
First Lien Collateral Agent for the benefit of the holders of
the Notes. Accordingly, there is no independent assurance that
no intervening Liens exist which would have priority over the
Liens created by the Mortgages in favor of the First Lien
Collateral Agent for the benefit of the holders of the Notes.
The Issuer and the Guarantors are and will be able to incur
additional Indebtedness in the future which could share in the
Collateral, including Additional First Lien Obligations,
additional ABL Obligations, additional Junior Lien Obligations
and Obligations secured by Permitted Liens. The amount of such
additional Obligations is and will be limited by the covenant
described under Certain covenantsLiens.
Under certain circumstances, the amount of any such additional
Obligations could be significant.
After-acquired
collateral
From and after the Issue Date and subject to certain limitations
and exceptions, (a) if the Issuer or any Guarantor creates
any additional security interest upon any property or asset that
would constitute Collateral to secure any First Lien Obligations
(other than European Collateral and Separate Receivables
Collateral), it must concurrently grant a first-priority
perfected security interest (subject to Permitted Liens) upon
such property as security for the Notes and (b) if the
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Issuer or any Guarantor creates any additional security interest
upon any property or asset that would constitute Shared
Receivables Collateral to secure any ABL Obligations, it must
concurrently grant a second-priority perfected security interest
(subject to Permitted Liens) upon such property as security for
the Notes.
Liens with
respect to the collateral
The Issuer, the Guarantors and the First Lien Collateral Agent
entered into Security Documents in connection with the General
Credit Facility and the Existing First Priority Notes with
respect to the Collateral defining the terms of the security
interests that secure the General Credit Facility and the
Existing First Priority Notes with respect to such Collateral
and that will define the terms of the security interests that
secure the Notes and the Guarantees with respect to such
Collateral. These security interests will secure the payment and
performance when due of all of the Obligations of the Issuers
and the Guarantors under the Notes, the Indenture, the
Guarantees and the Security Documents, as provided in the
Security Documents.
First lien
intercreditor agreement
The First Lien Collateral Agent has entered into, and the
Trustee, as authorized representative for the Holders of the
Notes, will consent to, a First Lien Intercreditor Agreement (as
the same may be amended from time to time, the First
Lien Intercreditor Agreement) with the Authorized
Representative of the General Credit Facility Obligations with
respect to the Collateral, which may be amended from time to
time without the consent of the Holders to add other parties
holding First Lien Obligations permitted to be incurred under
the Indenture, General Credit Facility, the Existing First
Priority Notes Indentures and the First Lien Intercreditor
Agreement. The First Lien Collateral Agent is initially the
collateral agent under the General Credit Facility.
Under the First Lien Intercreditor Agreement, as described
below, the Applicable Authorized
Representative has the right to direct foreclosures
and take other actions with respect to the Common Collateral,
and the Authorized Representatives of other Series of First Lien
Obligations have no right to take actions with respect to the
Common Collateral. The Applicable Authorized Representative will
initially be the administrative agent under the General Credit
Facility, and the Trustee for the Holders, as Authorized
Representative in respect of the Notes, will have no rights to
take any action under the First Lien Intercreditor Agreement.
The administrative agent under the General Credit Facility will
remain the Applicable Authorized Representative until the
earlier of (1) the Discharge of General Credit Facility
Obligations and (2) the Non-Controlling Authorized
Representative Enforcement Date (such date, the
Applicable Authorized Agent Date). After the
Applicable Authorized Agent Date, the Applicable Authorized
Representative will be the Authorized Representative of the
Series of Additional First Lien Obligations that constitutes the
largest outstanding principal amount of any then outstanding
Series of First Lien Obligations, other than the General Credit
Facility Obligations, with respect to the Common Collateral (the
Major Non-Controlling Authorized
Representative).
The Non-Controlling Authorized Representative
Enforcement Date is the date that is 90 days
(throughout which
90-day
period the applicable Authorized Representative was the Major
Non-Controlling Authorized Representative) after the occurrence
of both (a) an event of default, as defined in the
Indenture or other applicable indenture for that Series of First
Lien Obligations,
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and (b) the First Lien Collateral Agents and each
other Authorized Representatives receipt of written notice
from that Authorized Representative certifying that
(i) such Authorized Representative is the Major
Non-Controlling Authorized Representative and that an event of
default, as defined in the Indenture or other applicable
indenture for that Series of First Lien Obligations, has
occurred and is continuing and (ii) the First Lien
Obligations of that Series are currently due and payable in full
(whether as a result of acceleration thereof or otherwise) in
accordance with the Indenture or other applicable indenture for
that Series of First Lien Obligations; provided that the
Non-Controlling Authorized Representative Enforcement Date shall
be stayed and shall not occur and shall be deemed not to have
occurred with respect to any Shared Collateral (1) at any
time the administrative agent under the General Credit Facility
or the First Lien Collateral Agent has commenced and is
diligently pursuing any enforcement action with respect to such
Common Collateral or (2) at any time the Issuer or the
Guarantor that has granted a security interest in such Common
Collateral is then a debtor under or with respect to (or
otherwise subject to) any insolvency or liquidation proceeding.
The Applicable Authorized Representative shall have the sole
right to instruct the First Lien Collateral Agent to act or
refrain from acting with respect to the Common Collateral,
(b) the First Lien Collateral Agent shall not follow any
instructions with respect to such Common Collateral from any
representative of any Non-Controlling Secured Party or other
First Lien Secured Party (other than the Applicable Authorized
Representative), and (c) no Authorized Representative of
any Non-Controlling Secured Party or other First Lien Secured
Party (other than the Applicable Authorized Representative) will
instruct the First Lien Collateral Agent to commence any
judicial or non-judicial foreclosure proceedings with respect
to, seek to have a trustee, receiver, liquidator or similar
official appointed for or over, attempt any action to take
possession of, exercise any right, remedy or power with respect
to, or otherwise take any action to enforce its interests in or
realize upon, or take any other action available to it in
respect of, the Common Collateral.
Notwithstanding the equal priority of the Liens, the First Lien
Collateral Agent, acting on the instructions of the Applicable
Authorized Representative, may deal with the Common Collateral
as if such Applicable Authorized Representative had a senior
Lien on such Collateral. No representative of any
Non-Controlling Secured Party may contest, protest or object to
any foreclosure proceeding or action brought by the First Lien
Collateral Agent, Applicable Authorized Representative or
Controlling Secured Party. The Trustee and each other Authorized
Representative will agree that it will not accept any Lien on
any Collateral for the benefit of the Holders (other than funds
deposited for the discharge or defeasance of the Notes) other
than pursuant to the First Lien Security Documents. Each of the
New First Lien Secured Parties also will agree that it will not
contest or support any other person in contesting, in any
proceeding (including any insolvency or liquidation proceeding),
the perfection, priority, validity or enforceability of a Lien
held by or on behalf of any of the New First Lien Secured
Parties in all or any part of the Collateral, or the provisions
of the First Lien Intercreditor Agreement.
If a First Lien Event of Default has occurred and is continuing
and the First Lien Collateral Agent is taking action to enforce
rights in respect of any Common Collateral, or any distribution
is made with respect to any Common Collateral in any bankruptcy
case of the Issuer or any Guarantor, the proceeds of any sale,
collection or other liquidation of any such Collateral by the
First Lien Collateral Agent or any other First Lien Secured
Party (or received pursuant to any other intercreditor
agreement), as applicable, and proceeds of any such distribution
(subject, in the case of any such distribution, to the paragraph
immediately following) to which the First Lien Obligations are
entitled under any other intercreditor agreement shall be
applied among
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the First Lien Obligations to the payment in full of the First
Lien Obligations on a ratable basis, after payment of all
amounts owing to the First Lien Collateral Agent.
Notwithstanding the foregoing, with respect to any Common
Collateral for which a third party (other than a First Lien
Secured Party) has a lien or security interest that is junior in
priority to the security interest of any Series of First Lien
Obligations but senior (as determined by appropriate legal
proceedings in the case of any dispute) to the security interest
of any other Series of First Lien Obligations (such third party,
an Intervening Creditor), the value of any
Common Collateral or proceeds which are allocated to such
Intervening Creditor shall be deducted on a ratable basis solely
from the Common Collateral or proceeds to be distributed in
respect of the Series of First Lien Obligations with respect to
which such Impairment exists.
None of the First Lien Secured Parties may institute any suit or
assert in any suit, bankruptcy, insolvency or other proceeding
any claim against the First Lien Collateral Agent or any other
First Lien Secured Party seeking damages from or other relief by
way of specific performance, instructions or otherwise with
respect to any Common Collateral. In addition, none of the First
Lien Secured Parties may seek to have any Common Collateral or
any part thereof marshaled upon any foreclosure or other
disposition of such Collateral. If any First Lien Secured Party
obtains possession of any Common Collateral or realizes any
proceeds or payment in respect thereof, at any time prior to the
discharge of each of the First Lien Obligations, then it must
hold such Common Collateral, proceeds or payment in trust for
the other First Lien Secured Parties and promptly transfer such
Common Collateral, proceeds or payment to the First Lien
Collateral Agent to be distributed in accordance with the First
Lien Intercreditor Agreement.
If the Issuer or any Guarantor becomes subject to any bankruptcy
case, the First Lien Intercreditor Agreement provides that
(1) if the Issuer or any Guarantor shall, as
debtor(s)-in-possession, move for approval of financing (the
DIP Financing) to be provided by one or more
lenders (the DIP Lenders) under
Section 364 of the Bankruptcy Code or the use of cash
collateral under Section 363 of the Bankruptcy Code, each
First Lien Secured Party will agree not to object to any such
financing or to the Liens on the Common Collateral securing the
same (the DIP Financing Liens) or to any use
of cash collateral that constitutes Common Collateral, unless
any Controlling Secured Party, or an Authorized Representative
of any Controlling Secured Party, shall then oppose or object to
such DIP Financing or such DIP Financing Liens or use of cash
collateral (and (i) to the extent that such DIP Financing
Liens are senior to the Liens on any such Common Collateral for
the benefit of the Controlling Secured Parties, each
Non-Controlling Secured Party will subordinate its Liens with
respect to such Common Collateral on the same terms as the Liens
of the Controlling Secured Parties (other than any Liens of any
First Lien Secured Parties constituting DIP Financing Liens) are
subordinated thereto, and (ii) to the extent that such DIP
Financing Liens rank pari passu with the Liens on any
such Common Collateral granted to secure the First Lien
Obligations of the Controlling Secured Parties, each
Non-Controlling Secured Party will confirm the priorities with
respect to such Common Collateral as set forth in the First Lien
Intercreditor Agreement), in each case so long as:
(A) the First Lien Secured Parties of each Series retain
the benefit of their Liens on all such Common Collateral pledged
to the DIP Lenders, including proceeds thereof arising after the
commencement of such proceeding, with the same priority
vis-a-vis
all the other First Lien Secured Parties (other than any Liens
of the First Lien Secured Parties constituting DIP Financing
Liens) as existed prior to the commencement of the bankruptcy
case,
(B) the First Lien Secured Parties of each Series are
granted Liens on any additional collateral pledged to any First
Lien Secured Parties as adequate protection or otherwise in
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connection with such DIP Financing or use of cash collateral,
with the same priority
vis-a-vis
the First Lien Secured Parties as set forth in the First Lien
Intercreditor Agreement,
(C) if any amount of such DIP Financing or cash collateral
is applied to repay any of the First Lien Obligations, such
amount is applied pursuant to the First Lien Intercreditor
Agreement, and
(D) if any First Lien Secured Parties are granted adequate
protection, including in the form of periodic payments, in
connection with such DIP Financing or use of cash collateral,
the proceeds of such adequate protection is applied pursuant to
the First Lien Intercreditor Agreement;
provided that the First Lien Secured Parties of each
Series shall have a right to object to the grant of a Lien to
secure the DIP Financing over any Collateral subject to Liens in
favor of the First Lien Secured Parties of such Series or its
representative that shall not constitute Common Collateral; and
provided, further, that the First Lien Secured
Parties receiving adequate protection shall not object to any
other First Lien Secured Party receiving adequate protection
comparable to any adequate protection granted to such First Lien
Secured Parties in connection with a DIP Financing or use of
cash collateral.
The First Lien Secured Parties acknowledge that the First Lien
Obligations of any Series may, subject to the limitations set
forth in the other First Lien Documents, be increased, extended,
renewed, replaced, restated, supplemented, restructured, repaid,
refunded, refinanced or otherwise amended or modified from time
to time, all without affecting the priorities set forth in the
First Lien Intercreditor Agreement defining the relative rights
of the First Lien Secured Parties of any Series.
Additional
general intercreditor agreement
The First Lien Collateral Agent will be a party to an Additional
General Intercreditor Agreement to be dated the Issue Date (as
the same may be amended from time to time, the
Additional General Intercreditor Agreement),
by and among the First Lien Collateral Agent, the Junior Lien
Collateral Agent and the trustees under the Existing Second
Priority Notes Indentures and the Existing First Priority Notes
Indentures, by which the Notes will be given the same ranking
and rights with respect to the Collateral as provided to the
General Credit Facility under the General Intercreditor
Agreement, dated as of November 17, 2006, by and among the
First Lien Collateral Agent and the Junior Lien Collateral
Agent. Pursuant to the terms of the Additional General
Intercreditor Agreement and subject to the First Lien
Intercreditor Agreement, prior to the Discharge of New First
Lien Obligations, the First Lien Collateral Agent, acting on
behalf of the New First Lien Secured Parties, will determine the
time and method by which the security interests in the
Collateral will be enforced and will have the sole and exclusive
right to manage, perform and enforce the terms of the Security
Documents relating to the Collateral and to exercise and enforce
all privileges, rights and remedies thereunder according to its
direction, including to take or retake control or possession of
such Collateral and to hold, prepare for sale, marshall,
process, sell, lease, dispose of or liquidate such Collateral,
including, without limitation, following the occurrence of a
Default or Event of Default under the Indenture. The Junior Lien
Collateral Agent will not be permitted to enforce the security
interests even if any event of default under an Existing Second
Priority Notes Indenture has occurred and the Existing Second
Priority Notes issued thereunder have been accelerated except
(a) in any insolvency or liquidation proceeding, solely as
necessary to file a proof of claim or statement of interest with
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respect to the Junior Lien Obligations or (b) as necessary
to take any action in order to prove, preserve, perfect or
protect (but not enforce) its security interest and rights in,
and the perfection and priority of its Lien on, the Collateral.
The Junior Lien Collateral Agent, for itself and on behalf of
each Junior Lien Secured Party, has agreed pursuant to the
Additional General Intercreditor Agreement that (a) it will
not (and thereby waives any right to) take any action to
challenge, contest or support any other Person in contesting or
challenging, directly or indirectly, in any proceeding
(including any insolvency or liquidation proceeding), the
validity, perfection, priority or enforceability of a Lien
securing any New First Lien Obligations held (or purported to be
held) by or on behalf of the First Lien Collateral Agent or any
of the New First Lien Secured Parties or any agent or trustee
therefor in any Collateral or other collateral securing both the
New First Lien Obligations and any Junior Lien Obligations and
(b) it will not oppose or otherwise contest (or support any
other Person contesting) any request for judicial relief made in
any court by the First Lien Collateral Agent or any New First
Lien Secured Parties relating to the lawful enforcement of any
First Priority Lien on Collateral or other collateral securing
both the New First Lien Obligations and any Junior Lien
Obligations.
In addition, the Security Documents provide that, subject to the
First Lien Intercreditor Agreement, prior to the Discharge of
New First Lien Obligations, the First Lien Collateral Agent may
take actions with respect to the Collateral (including the
release of Collateral and the manner of realization (subject to
the provisions described under Release of
collateral)) without the consent of the Junior Lien
Collateral Agent or other Junior Lien Secured Parties.
The Collateral or proceeds thereof received in connection with
the sale or other disposition of, or collection on, such
Non-Receivables Collateral upon the exercise of remedies will be
applied to the First Lien Obligations to be distributed in
accordance with the First Lien Intercreditor Agreement prior to
application to any Junior Lien Obligations in such order as
specified in the relevant First Lien Documents until the
Discharge of New First Lien Obligations has occurred.
In addition, so long as the Discharge of New First Lien
Obligations has not occurred, neither the Junior Lien Collateral
Agent nor any Junior Lien Representative shall acquire or hold
any Lien on any assets of the Issuer or any Subsidiary (and
neither the Issuer nor any Subsidiary shall grant such Lien)
securing any Junior Lien Obligations that are not also subject
to the First Priority Lien in respect of the New First Lien
Obligations under the New First Lien Documents.
The Junior Lien Collateral Agent and each other Junior Lien
Secured Party will agree that any Lien purported to be granted
on any collateral as security for New First Lien Obligations
shall be deemed to be and shall be deemed to remain senior in
all respects and prior to all Liens on such collateral securing
any Junior Lien Obligations for all purposes regardless of
whether the Lien purported to be granted is found to be
improperly granted, improperly perfected, preferential, a
fraudulent conveyance or legally or otherwise deficient in any
manner.
If any New First Lien Secured Party is required in any
insolvency or liquidation proceeding or otherwise to turn over
or otherwise pay to the estate of the Issuer or any other
Guarantor (or any trustee, receiver or similar person therefor),
because the payment of such amount was declared to be fraudulent
or preferential in any respect or for any other reason, any
amount (a Recovery), whether received as
proceeds of security, enforcement of any right of setoff or
otherwise, then as among the parties hereto, the New First Lien
Obligations shall be deemed to be reinstated to the extent of
such Recovery and to be outstanding as if such payment had not
occurred and such New First Lien Secured Party shall be entitled
to a reinstatement of New First
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Lien Obligations with respect to all such recovered amounts and
shall have all rights hereunder. If the Additional General
Intercreditor Agreement shall have been terminated prior to such
Recovery, the Additional General Intercreditor Agreement
shall be reinstated in full force and effect, and such prior
termination shall not diminish, release, discharge, impair or
otherwise affect the obligations of the parties thereto.
The Additional General Intercreditor Agreement will provide that
so long as the Discharge of New First Lien Obligations has not
occurred, whether or not any insolvency or liquidation
proceeding has been commenced by or against the Issuer or any
Guarantor, (i) neither the Junior Lien Collateral Agent,
any Junior Lien Representative nor any Junior Lien Secured Party
will (x) exercise or seek to exercise any rights or
remedies (including setoff or the right to credit bid debt
(except under limited circumstances)) with respect to any
collateral securing both the New First Lien Obligations and any
Junior Lien Obligations in respect of any applicable Junior Lien
Obligations, or institute any action or proceeding with respect
to such rights or remedies (including any action of
foreclosure), (y) contest, protest or otherwise object to
any foreclosure or enforcement proceeding or action brought with
respect to the Collateral or any other collateral by the First
Lien Collateral Agent or any New First Lien Secured Party in
respect of the New First Lien Obligations, the exercise of any
right by the First Lien Collateral Agent or any New First Lien
Secured Party (or any agent or
sub-agent on
their behalf) in respect of the New First Lien Obligations under
any control agreement, lockbox agreement, landlord waiver or
bailees letter or similar agreement or arrangement to
which the Junior Lien Collateral Agent, any Junior Lien
Representative or any Junior Lien Secured Party either is a
party or may have rights as a third-party beneficiary, or any
other exercise by any such party of any rights and remedies as a
secured party relating to such collateral or any other
collateral under the New First Lien Documents or otherwise in
respect of New First Lien Obligations, or (z) object to any
waiver or forbearance by the First Lien Secured Parties from or
in respect of bringing or pursuing any foreclosure proceeding or
action or any other exercise of any rights or remedies relating
to such collateral or any other collateral in respect of New
First Lien Obligations and (ii) except as otherwise
provided in the Additional General Intercreditor Agreement, the
First Lien Collateral Agent and the New First Lien Secured
Parties shall have the sole and exclusive right to enforce
rights, exercise remedies (including setoff and the right to
credit bid their debt), marshal, process and make determinations
regarding the release, disposition or restrictions, or waiver or
forbearance of rights or remedies with respect to such
collateral without any consultation with or the consent of the
Junior Lien Collateral Agent, any Junior Lien Representative or
any Junior Lien Secured Party.
In addition, the Junior Lien Collateral Agent, each Junior Lien
Representative and each other Junior Lien Secured Party will
agree, among other things, that if the Issuer or any Guarantor
is subject to any insolvency or liquidation proceeding if the
First Lien Collateral Agent, subject to the First Lien
Intercreditor Agreement, desires to permit the use of cash
collateral or to permit the Issuer or any Guarantor to obtain
DIP Financing, including if such DIP Financing is secured by
Liens senior in priority to the Liens securing the Junior Lien
Obligations, then the Junior Lien Collateral Agent and each
Junior Lien Representative, on behalf of itself and each
applicable Junior Lien Secured Party, agrees not to object to
such use of cash collateral or DIP Financing and will not
request adequate protection or any other relief in connection
therewith (except to the extent permitted by the Additional
General Intercreditor Agreement) and, to the extent the Liens
securing the new First Lien Obligations are subordinated or
pari passu with such DIP Financing, will subordinate its
Liens in the Collateral and any other collateral to such DIP
Financing (and all Obligations relating thereto) on the same
basis as they are subordinated to the New First Lien Obligations.
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Subject to the terms of the Security Documents, the Issuer and
the Guarantors have the right to remain in possession and retain
exclusive control of the Collateral securing the Notes and the
Notes Obligations (other than securities, instruments and
chattel paper constituting part of the Collateral and deposited
with the First Lien Collateral Agent in accordance with the
provisions of the First Lien Security Documents and any Shared
Receivables Collateral subject to a control agreement under the
circumstances described in the First Lien Security Documents),
to freely operate the Collateral and to collect, invest and
dispose of any income therefrom.
Release of
collateral
Under the First Lien Intercreditor Agreement, if at any time the
Applicable Authorized Representative forecloses upon or
otherwise exercises remedies against any Common Collateral, then
(whether or not any insolvency or liquidation proceeding is
pending at the time) the Liens in favor of the First Lien
Collateral Agent for the benefit of the Trustee and the Holders
of the Notes and each other Series of First Lien Secured Parties
upon such Common Collateral will automatically be released and
discharged. However, any proceeds of any Common Collateral
realized therefrom will be applied as described under
First lien intercreditor agreement.
Under the Additional Receivables Intercreditor Agreement, if at
any time the Issuer or any Guarantor or any ABL Secured Party
delivers notice that any Shared Receivables Collateral is sold,
transferred or otherwise disposed of by the owner of that
Collateral in a transaction permitted under the ABL Facility,
the General Credit Facility and the Indenture or the ABL Secured
Parties are releasing or have released their Liens on such
Shared Receivables Collateral in connection with a disposition
in connection with an exercise of remedies with respect to such
Collateral, then the Liens on such Shared Receivables Collateral
securing New First Lien Obligations or Junior Lien Obligations
will automatically be released and discharged as and when, but
only to the extent, such Liens on such Shared Receivables
Collateral securing ABL Obligations are released and discharged,
provided that in the case of a disposition in connection
with an exercise of remedies, any proceeds thereof not applied
to repay ABL Obligations shall be subject to the Liens securing
the First Lien Obligations and the Junior Lien Obligations and
shall be applied pursuant to the Additional Receivables
Intercreditor Agreement and the First Lien Intercreditor
Agreement.
The Issuer and the Guarantors will be entitled to the release of
property and other assets constituting Collateral from the Liens
securing the Notes and the Notes Obligations under any one or
more of the following circumstances:
(1) to enable us to consummate the sale, transfer or other
disposition of such property or assets to the extent not
prohibited under the covenant described under
Repurchase at the option of holdersAsset
sales;
(2) the release of Excess Proceeds or Collateral Excess
Proceeds that remain unexpended after the conclusion of an Asset
Sale Offer or a Collateral Asset Sale Offer conducted in
accordance with the Indenture;
(3) in the case of a Guarantor that is released from its
Guarantee with respect to the Notes pursuant to the terms of the
Indenture, the release of the property and assets of such
Guarantor;
(4) with the consent of the Holders of at least 75% of the
aggregate principal amount of the Notes then outstanding and
affected thereby and a majority of all Junior Lien
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Obligations (including the Existing Second Priority Notes) then
outstanding and affected thereby (including, without limitation,
consents obtained in connection with a tender offer or exchange
offer for, or purchase of, Junior Lien Obligations);
(5) to the extent that such Collateral is released or no
longer required to be pledged pursuant to the terms of the
Credit Facilities; or
(6) as described under Modification and
waiver below.
To the extent necessary and for so long as required for such
Subsidiary not to be subject to any requirement pursuant to
Rule 3-16
of
Regulation S-X
under the Securities Act to file separate financial statements
with the SEC (or any other governmental agency), the Capital
Stock of any Subsidiary of the Company (excluding Healthtrust,
Inc.The Hospital Company, a Delaware corporation and its
successors and assigns) shall not be included in the Collateral
with respect to the Notes (as described under
Certain limitations on the collateral) and
shall not be subject to the Liens securing the Notes and the
Notes Obligations.
The Liens on the Collateral securing the Notes and the
Guarantees also will be released upon (i) payment in full
of the principal of, together with accrued and unpaid interest
on, the Notes and all other Obligations under the Indenture, the
Guarantees and the Security Documents that are due and payable
at or prior to the time such principal, together with accrued
and unpaid interest, are paid or (ii) a defeasance under
the Indenture as described below under Defeasance.
Any certificate or opinion required by Section 314(d) of
the Trust Indenture Act may be made by an Officer of the
Company, except in cases where Section 314(d) requires that
such certificate or opinion be made by an independent engineer,
appraiser or other expert.
Notwithstanding anything to the contrary herein, the Issuer and
its Subsidiaries will not be required to comply with all or any
portion of Section 314(d) of the Trust Indenture Act
if they determine, in good faith based on advice of counsel,
that under the terms of that section
and/or any
interpretation or guidance as to the meaning thereof of the SEC
and its staff, including no action letters or
exemptive orders, all or any portion of Section 314(d) of
the Trust Indenture Act is inapplicable to the released
Collateral.
Without limiting the generality of the foregoing, certain no
action letters issued by the SEC have permitted an indenture
qualified under the Trust Indenture Act to contain
provisions permitting the release of collateral from Liens under
such indenture in the ordinary course of the issuers
business without requiring the issuer to provide certificates
and other documents under Section 314(d) of the
Trust Indenture Act. The Issuer and the Guarantors may,
subject to the provisions of the Indenture, among other things,
without any release or consent by the First Lien Collateral
Agent, conduct ordinary course activities with respect to the
Collateral, including, without limitation:
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selling or otherwise disposing of, in any transaction or series
of related transactions, any property subject to the Lien of the
Security Documents that has become worn out, defective, obsolete
or not used or useful in the business;
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abandoning, terminating, canceling, releasing or making
alterations in or substitutions of any leases or contracts
subject to the Lien of the Indenture or any of the Security
Documents;
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surrendering or modifying any franchise, license or permit
subject to the Lien of the Security Documents that it may own or
under which it may be operating;
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altering, repairing, replacing, changing the location or
position of and adding to its structures, machinery, systems,
equipment, fixtures and appurtenances;
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granting a license of any intellectual property;
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selling, transferring or otherwise disposing of inventory in the
ordinary course of business;
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collecting accounts receivable in the ordinary course of
business as permitted by the covenant described under
Repurchase at the option of holdersAsset
sales;
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making cash payments (including for the repayment of
Indebtedness or interest) from cash that is at any time part of
the Collateral in the ordinary course of business that are not
otherwise prohibited by the Indenture and the Security
Documents; and
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abandoning any intellectual property that is no longer used or
useful in the Issuers business.
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Additional
receivables intercreditor agreement
In addition, the First Lien Collateral Agent will be a party to
an Additional Receivables Intercreditor Agreement, to be dated
the Issue Date (as the same may be amended from time to time,
the Additional Receivables Intercreditor
Agreement), by and between the First Lien Collateral
Agent and the collateral agent under the ABL Facility (the
ABL Collateral Agent), by which the Notes
will be given the same ranking and rights with respect to the
Shared Receivables Collateral as provided to the General Credit
Facility under the Receivables Intercreditor Agreement dated as
of November 17, 2006 by and among the Junior Lien
Collateral Agent, the First Lien Collateral Agent and the ABL
Collateral Agent. The Additional Receivables Intercreditor
Agreement will contain provisions with respect to the Shared
Receivables Collateral and the relative rights, privileges and
obligations relating thereto as between (a) the First Lien
Collateral Agent and the New First Lien Secured Parties and
(b) the ABL Collateral Agent and the ABL Secured Parties.
The Additional Receivables Intercreditor Agreement will provide
for first-priority Liens in the Shared Receivables Collateral in
favor of the ABL Secured Parties and junior priority Liens in
the Shared Receivables Collateral in favor of the New First Lien
Secured Parties, subject to Permitted Liens. The relative
rights, privileges and obligations with respect to the Shared
Receivables Collateral of the ABL Secured Parties, on the one
hand, and the New First Lien Secured Parties, on the other, are
substantially similar to the relative rights, privileges and
obligations with respect to the Non-Receivables Collateral of
the New First Lien Secured Parties, on the one hand, and the
Junior Lien Secured Parties, on the other, respectively, except
that the Liens of the New First Lien Secured Parties in the
Shared Receivables Collateral are second-priority Liens and the
Liens of the ABL Secured Parties in the Shared Receivables
Collateral are first-priority liens and except to the extent
customary or necessary with respect to collateral of the type
that constitutes Shared Receivables Collateral.
The relative rights, privileges and obligations with respect to
the Shared Receivables Collateral (a) as between the First
Lien Collateral Agent and the New First Lien Secured Parties, on
the one hand, and the Junior Lien Collateral Agent and the
Junior Lien Secured Parties, on the other, are governed by the
Additional General Intercreditor Agreement described above and
(b) as among the First Lien Secured Parties, are governed
by the First Lien Intercreditor Agreement described above.
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Certain
limitations on the collateral
The Collateral securing the Notes will not include any of the
following assets:
(1) the property or assets owned by any Subsidiary of the
Issuer that is not a Guarantor, including each ABL Financing
Entity;
(2) any rights or interests of the Issuer or any Guarantor
in, to or under any agreement, contract, license, instrument,
document or other general intangible (referred to solely for
purposes of this clause (2) as a
Contract), any intellectual property or any
security or other investment property (i) to the extent the
security interest in such Collateral is prohibited by any
applicable contract, agreement or other instrument without the
consent of any other party thereto (other than a party to the
General Credit Facility or the Indenture or, in the case of
investment property, a Wholly-Owned Subsidiary), (ii) to
the extent the security interest in such Contract would give any
other party (other than a party to the General Credit Facility
or the Indenture or, in the case of investment property, a
Wholly-Owned Subsidiary) to such Collateral the right to
terminate its obligations thereunder or (iii) to the extent
all necessary consents to such grant of a security interest have
not been obtained from the other parties thereto (other than to
the extent that any such prohibition referred to in clauses (i),
(ii) and (iii) would be rendered ineffective pursuant
to
Sections 9-406,
9-407, 9-408 or 9-409 of the Uniform Commercial Code (or any
successor provision or provisions) of any relevant jurisdiction
or any other applicable law); provided that this
limitation shall not affect, limit, restrict or impair the grant
by the Issuer or such Guarantor of a security interest in any
account receivable or any money or other amounts due or to
become due under any Contract;
(3) any equipment of the Issuer or any Guarantor that is
subject to, or secured by, a Capitalized Lease Obligation or
Purchase Money Obligations and any equipment that constitutes an
asset of an entity acquired in a transaction permitted by the
Indenture to the extent that such equipment subject to a Lien
permitted by the Indenture and the terms of the Indebtedness
secured by such Lien prohibit assignment of, or granting of a
security interest in, the Issuers or such Guarantors
rights and interests therein (other than to the extent that any
such prohibition would be rendered ineffective pursuant to
Sections 9-406,
9-407, 9-408
or 9-409 of the Uniform Commercial Code (or any successor
provision or provisions) of any relevant jurisdiction or any
other applicable law); provided that immediately upon the
repayment of all Indebtedness secured by such Lien, the Issuer
or the Guarantor, as the case may be, shall be deemed to have
granted a security interest in all the rights and interests with
respect to such equipment;
(4) any Voting Stock that is issued by any Foreign
Subsidiary, if and to the extent that the inclusion of such
Voting Stock in the Collateral would cause the Collateral
pledged by the Issuer or the applicable Guarantor, as the case
may be, to include in the aggregate more than 65% of the total
combined voting power of all classes of Voting Stock of such
Foreign Subsidiary;
(5) any Capital Stock that is issued by a Subsidiary that
is not owned directly by the Issuer or a Guarantor;
(6) any Capital Stock and other securities of a Subsidiary
(excluding Healthtrust, Inc.The Hospital Company, a
Delaware corporation and its successors and assigns) to the
extent that the pledge of such Capital Stock and other
securities results in the Companys being
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required to file separate financial statements of such
Subsidiary with the SEC, but only to the extent necessary to not
be subject to such requirement and only for so long as such
requirement is in existence and only with respect to the
relevant Notes affected; provided that neither the Issuer
nor any Subsidiary shall take any action in the form of a
reorganization, merger or other restructuring a principal
purpose of which is to provide for the release of the Lien on
any Capital Stock pursuant to this clause (6). In addition, in
the event that
Rule 3-16
of
Regulation S-X
under the Securities Act is amended, modified or interpreted by
the SEC to require (or is replaced with another rule or
regulation, or any other law, rule or regulation is adopted,
which would require) the filing with the SEC (or any other
governmental agency) of separate financial statements of any
Subsidiary of the Company (excluding Healthtrust, Inc.The
Hospital Company, a Delaware corporation and its successors and
assigns) due to the fact that such Subsidiarys Capital
Stock secures the Notes affected thereby, then the Capital Stock
of such Subsidiary will automatically be deemed not to be part
of the Collateral securing the relevant Notes affected thereby
but only to the extent necessary to not be subject to such
requirement and only for so long as required to not be subject
to such requirement. In such event, the Security Documents may
be amended or modified, without the consent of any Holder of
such Notes, to the extent necessary to release the security
interests in favor of the First Lien Collateral Agent on the
shares of Capital Stock that are so deemed to no longer
constitute part of the Collateral for the relevant Notes. In the
event that
Rule 3-16
of
Regulation S-X
under the Securities Act is amended, modified or interpreted by
the SEC to permit (or is replaced with another rule or
regulation, or any other law, rule or regulation is adopted,
which would permit) such Subsidiarys Capital Stock to
secure the Notes in excess of the amount then pledged without
the filing with the SEC (or any other governmental agency) of
separate financial statements of such Subsidiary, then the
Capital Stock of such Subsidiary will automatically be deemed to
be a part of the Collateral for the relevant Notes;
(7) certain non-Principal Properties that do not constitute
Non-Receivables Collateral;
(8) any deposit accounts, other bank or securities accounts
or cash of the Issuer or any Guarantor;
(9) any leaseholds and motor vehicles of the Issuer or any
Guarantor;
(10) any Capital Stock or securities convertible into or
exchangeable for Capital Stock (i) if, in the reasonable
judgment of the Issuer, the cost or other consequences of
pledging such Collateral shall be excessive in view of the
benefits to be obtained by the First Lien Secured Parties
therefrom or (ii) the pledge of such Collateral would
result in adverse tax consequences to the Issuer or any of its
Subsidiaries as reasonably determined by the Issuer and
identified in writing to the First Lien Collateral Agent;
(11) any collateral to the extent the grant of the security
interest therein would violate any requirement of law; and
(12) proceeds and products from any and all of the
foregoing excluded collateral described in clauses (1)
through (11), unless such proceeds or products would otherwise
constitute Collateral securing the Notes.
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Sufficiency of
collateral
The fair market value of the Collateral is subject to
fluctuations based on factors that include, among others, the
condition of the health care industry, the ability to sell the
Collateral in an orderly sale, general economic conditions, the
availability of buyers and similar factors. The amount to be
received upon a sale of the Collateral would also be dependent
on numerous factors, including, but not limited to, the actual
fair market value of the Collateral at such time and the timing
and the manner of the sale. By their nature, portions of the
Collateral may be illiquid and may have no readily ascertainable
market value. Accordingly, there can be no assurance that the
Collateral can be sold in a short period of time or in an
orderly manner. In addition, in the event of a bankruptcy, the
ability of the Holders to realize upon any of the Collateral may
be subject to certain bankruptcy law limitations as described
below.
Certain
Bankruptcy Limitations
The right of the Trustee to repossess and dispose of the
Collateral upon the occurrence of an Event of Default would be
significantly impaired by any Bankruptcy Law in the event that a
bankruptcy case were to be commenced by or against the Company
or any Guarantor prior to the Trustees having repossessed
and disposed of the Collateral. Upon the commencement of a case
for relief under the Bankruptcy Code, a secured creditor such as
the Trustee is prohibited from repossessing its security from a
debtor in a bankruptcy case, or from disposing of security
without bankruptcy court approval.
In view of the broad equitable powers of a U.S. bankruptcy
court, it is impossible to predict how long payments under the
Notes could be delayed following commencement of a bankruptcy
case, whether or when the Trustee could repossess or dispose of
the Collateral, the value of the Collateral at any time during a
bankruptcy case or whether or to what extent Holders of the
Notes would be compensated for any delay in payment or loss of
value of the Collateral. The Bankruptcy Code permits only the
payment
and/or
accrual of post-petition interest, costs and attorneys
fees to a secured creditor during a debtors bankruptcy
case to the extent the value of such creditors interest in
the Collateral is determined by the bankruptcy court to exceed
the aggregate outstanding principal amount of the obligations
secured by the Collateral.
Furthermore, in the event a domestic or foreign bankruptcy court
determines that the value of the Collateral is not sufficient to
repay all amounts due on the Notes, the Holders of the Notes
would hold secured claims only to the extent of the value of the
Collateral to which the Holders of the Notes are entitled, and
unsecured claims with respect to such shortfall.
Principal,
maturity and interest
The Issuer will issue $3.000 billion of the Notes in this
offering. The Notes will mature on February 15, 2020. The
Notes will bear interest at the rate of 6.50% per annum,
computed on the basis of a
360-day year
of twelve
30-day
months, commencing on the Issue Date. Interest will be payable
twice a year on February 15 and August 15, beginning
on February 15, 2012. Interest payable on any Note that is
punctually paid or duly provided for on any interest payment
date shall be paid to the person in whose name such Note is
registered at the close of business on February 1 and
August 1, as the case may be, preceding such interest
payment date.
The Issuer may issue additional Notes, from time to time after
this offering under the Indenture (any such Notes,
Additional Notes). The Notes offered by the
Issuer and any Additional Notes subsequently issued under the
Indenture will be treated as a single class for all purposes
under
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the Indenture, including waivers, amendments, redemptions and
offers to purchase. Unless the context requires otherwise,
references to Notes for all purposes of the
Indenture and this Description of the secured notes
include any Additional Notes that are actually issued.
The Notes will be issued in book-entry form only.
Mandatory
redemption; offers to purchase; open market purchases
The Issuer will not be required to make any mandatory redemption
or sinking fund payments with respect to the Notes. However,
under certain circumstances, the Issuer may be required to offer
to purchase Notes as described under the caption
Repurchase at the option of holders. The
Issuer may at any time and from time to time purchase Notes in
the open market or otherwise.
Optional
redemption
The Notes will be redeemable, at our option, at any time in
whole or from time to time in part, at a redemption, or
make-whole, price equal to the greater of:
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100% of the aggregate principal amount of the Notes to be
redeemed, and
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an amount equal to sum of the present value of the remaining
scheduled payments of principal of and interest on the Notes to
be redeemed (excluding accrued and unpaid interest to the
redemption date and subject to the right of Holders on the
relevant record date to receive interest due on the relevant
interest payment date) discounted from their scheduled date of
payment to the redemption date on a semi-annual basis (assuming
a 360-day
year consisting of twelve
30-day
months) using a discount rate equal to the Treasury Rate plus
50 basis points
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plus, in each of the above cases, accrued and unpaid interest,
if any, to such redemption date.
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Any notice of any redemption may be given prior to the
redemption thereof, and any such redemption or notice may, at
the Issuers discretion, be subject to one or more
conditions precedent, including, but not limited to, completion
of an equity offering or other corporate transaction. Notes
called for redemption will become due on the date fixed for
redemption. Notices of redemption will be mailed at least
30 days but not more than 60 days before the
redemption date to each Holder of the Notes to be redeemed at
its registered address. The notice of redemption for the Notes
will state, among other things, the amount of Notes to be
redeemed, if less than all of the outstanding Notes are to be
redeemed, the redemption date, the redemption price (or the
method of calculating it) and each place that payment will be
made upon presentation and surrender of Notes to be redeemed.
Unless we default in payment of the redemption price, interest
will cease to accrue on any Notes that have been called for
redemption on the redemption date. If the Issuer redeems less
than all of the outstanding Notes, the Registrar and Paying
Agent shall select the Notes to be redeemed in the manner
described under Repurchase at the option of
holdersSelection and notice.
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For purposes of determining the optional redemption price, the
following definitions are applicable:
Comparable Treasury Issue means, the United
States Treasury security selected by an Independent Investment
Banker as having a maturity comparable to the remaining term
(Remaining Life) of a Note being redeemed
that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to
the Remaining Life of such Notes.
Comparable Treasury Price means, with respect
to any redemption date for any Note: (1) the average of the
Reference Treasury Dealer Quotations for that redemption date,
after excluding the highest and lowest of four such Reference
Treasury Dealer Quotations; or (2) if the Independent
Investment Banker is given fewer than four Reference Treasury
Dealer Quotations, the average of all quotations obtained by the
Independent Investment Banker.
Independent Investment Banker means one of
the Reference Treasury Dealers, to be appointed by the Issuer.
Reference Treasury Dealer Quotations means,
with respect to each Reference Treasury Dealer and any
redemption date for any Note, the average, as determined by the
Independent Investment Banker, of the bid and asked prices for
the Comparable Treasury Issue, expressed in each case as a
percentage of its principal amount, quoted in writing to the
Independent Investment Banker by such Reference Treasury Dealer
at 3:00 p.m., New York City time, on the third Business Day
preceding such redemption date.
Treasury Rate means, at the time of
computation, (1) the semi-annual equivalent yield to
maturity of the United States Treasury Securities with a
constant maturity (as compiled and published in the most recent
Federal Reserve Statistical Release H.15(519) which has become
publicly available at least two Business Days prior to the
redemption date or, if such Statistical Release is no longer
published, any publicly available source of similar market data)
for the maturity corresponding to the Comparable Treasury Issue;
provided, however, that if no maturity is within
three months before or after the maturity date for the notes,
yields for the two published maturities most closely
corresponding to the Comparable Treasury Issue will be
determined and the Treasury Rate will be interpolated or
extrapolated from those yields on a straight line basis,
rounding to the nearest month; or (2) if that release, or
any successor release, is not published during the week
preceding the calculation date or does not contain such yields,
the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, calculated using a
price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable
Treasury Price for that redemption date. The Treasury Rate will
be calculated on the third Business Day preceding the redemption
date.
Except as set forth above, the Notes will not be redeemable by
us prior to maturity.
Denominations,
registration and transfer
The Issuer will issue the Notes in registered form and in
denominations of $2,000 or any integral multiple of $1,000 in
excess thereof. We have appointed Deutsche Bank Trust Company
Americas as security registrar.
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Repurchase at the
option of holders
Change of
control
The Notes will provide that if a Change of Control occurs,
unless the Issuer has previously or concurrently mailed a
redemption notice with respect to all the outstanding Notes as
described under Optional Redemption, the Issuer will
make an offer to purchase all of the Notes pursuant to the offer
described below (the Change of Control Offer)
at a price in cash (the Change of Control
Payment) equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest, if any, to the
date of purchase, subject to the right of Holders of the Notes
of record on the relevant record date to receive interest due on
the relevant interest payment date. Within 30 days
following any Change of Control, the Issuer will send notice of
such Change of Control Offer by first-class mail, with a copy to
the Trustee and the Registrar, to each Holder of Notes to the
address of such Holder appearing in the security register with a
copy to the Trustee and the Registrar or otherwise in accordance
with the procedures of DTC, with the following information:
(1) that a Change of Control Offer is being made pursuant
to the covenant entitled Change of Control and that
all Notes properly tendered pursuant to such Change of Control
Offer will be accepted for payment by the Issuer;
(2) the purchase price and the purchase date, which will be
no earlier than 30 days nor later than 60 days from
the date such notice is mailed (the Change of Control
Payment Date);
(3) that any Note not properly tendered will remain
outstanding and continue to accrue interest;
(4) that unless the Issuer defaults in the payment of the
Change of Control Payment, all Notes accepted for payment
pursuant to the Change of Control Offer will cease to accrue
interest on the Change of Control Payment Date;
(5) that Holders electing to have any Notes purchased
pursuant to a Change of Control Offer will be required to
surrender such Notes, with the form entitled Option of
Holder to Elect Purchase on the reverse of such Notes
completed, to the paying agent specified in the notice at the
address specified in the notice prior to the close of business
on the third Business Day preceding the Change of Control
Payment Date;
(6) that Holders will be entitled to withdraw their
tendered Notes and their election to require the Issuer to
purchase such Notes; provided that the paying agent
receives, not later than the close of business on the
30th day following the date of the Change of Control
notice, a telegram, facsimile transmission or letter setting
forth the name of the Holder of the Notes, the principal amount
of Notes tendered for purchase, and a statement that such Holder
is withdrawing its tendered Notes and its election to have such
Notes purchased;
(7) that Holders tendering less than all of their Notes
will be issued new Notes and such new Notes will be equal in
principal amount to the unpurchased portion of the Notes
surrendered. The unpurchased portion of the Notes must be equal
to $2,000 or an integral multiple of $1,000 in excess
thereof; and
(8) the other instructions, as determined by us, consistent
with the covenant described hereunder, that a Holder must follow.
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The Issuer will comply with the requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws or regulations
are applicable in connection with the repurchase of Notes
pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with
the provisions of the Indenture, the Issuer will comply with the
applicable securities laws and regulations and shall not be
deemed to have breached its obligations described in the
Indenture by virtue thereof.
On the Change of Control Payment Date, the Issuer will, to the
extent permitted by law,
(1) accept for payment all Notes issued by it or portions
thereof properly tendered pursuant to the Change of Control
Offer;
(2) deposit with the paying agent an amount equal to the
aggregate Change of Control Payment in respect of all Notes or
portions thereof so tendered; and
(3) deliver, or cause to be delivered, to the Trustee for
cancellation the Notes so accepted together with an
Officers Certificate to the Trustee stating that such
Notes or portions thereof have been tendered to and purchased by
the Issuer.
The Senior Credit Facilities provide, and future credit
agreements or other agreements relating to Senior Indebtedness
to which the Issuer becomes a party may provide, that certain
change of control events with respect to the Issuer would
constitute a default thereunder (including a Change of Control
under the Indenture). If we experience a change of control that
triggers a default under our Senior Credit Facilities, we could
seek a waiver of such default or seek to refinance our Senior
Credit Facilities. In the event we do not obtain such a waiver
or refinance the Senior Credit Facilities, such default could
result in amounts outstanding under our Senior Credit Facilities
being declared due and payable and could cause a Receivables
Facility to be wound down.
The Issuers ability to pay cash to the Holders of the
Notes following the occurrence of a Change of Control may be
limited by its then-existing financial resources. Therefore,
sufficient funds may not be available when necessary to make any
required repurchases.
The Change of Control purchase feature of the Notes may in
certain circumstances make more difficult or discourage a sale
or takeover of us and, thus, the removal of incumbent
management. The Change of Control purchase feature is a result
of negotiations between the Underwriters and us. After the Issue
Date, we have no present intention to engage in a transaction
involving a Change of Control, although it is possible that we
could decide to do so in the future. Subject to the limitations
discussed below, we could, in the future, enter into certain
transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control
under the Indenture, but that could increase the amount of
indebtedness outstanding at such time or otherwise affect our
capital structure or credit ratings. Such restrictions in the
Indenture can be waived only with the consent of the Holders of
a majority in principal amount of the Notes then outstanding.
Except for the limitations contained in such covenants, however,
the Indenture will not contain any covenants or provisions that
may afford Holders of the Notes protection in the event of a
highly leveraged transaction.
The Issuer will not be required to make a Change of Control
Offer following a Change of Control if a third party makes the
Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in the
Indenture applicable to a
S-81
Change of Control Offer made by us and purchases all Notes
validly tendered and not withdrawn under such Change of Control
Offer. Notwithstanding anything to the contrary herein, a Change
of Control Offer may be made in advance of a Change of Control,
conditional upon such Change of Control, if a definitive
agreement is in place for the Change of Control at the time of
making of the Change of Control Offer.
The definition of Change of Control includes
a disposition of all or substantially all of the assets of the
Issuer to any Person. Although there is a limited body of case
law interpreting the phrase substantially all, there
is no precise established definition of the phrase under
applicable law. Accordingly, in certain circumstances there may
be a degree of uncertainty as to whether a particular
transaction would involve a disposition of all or
substantially all of the assets of the Issuer. As a
result, it may be unclear as to whether a Change of Control has
occurred and whether a Holder of Notes may require the Issuer to
make an offer to repurchase the Notes as described above.
The provisions under the Indenture relating to the Issuers
obligation to make an offer to repurchase the Notes as a result
of a Change of Control may be waived or modified with the
written consent of the Holders of a majority in principal amount
of the Notes.
Asset
sales
The Indenture will provide that the Issuer will not, and will
not permit any of its Restricted Subsidiaries to consummate,
directly or indirectly, an Asset Sale, unless:
(1) the Issuer or such Restricted Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at
least equal to the fair market value (as determined in good
faith by the Issuer) of the assets sold or otherwise disposed
of; and
(2) except in the case of a Permitted Asset Swap, at least
75% of the consideration therefor received by the Issuer or such
Restricted Subsidiary, as the case may be, is in the form of
cash or Cash Equivalents; provided that the amount of:
(a) any liabilities (as shown on the Issuers or such
Restricted Subsidiarys most recent balance sheet or in the
footnotes thereto) of the Issuer or such Restricted Subsidiary,
other than liabilities that are by their terms subordinated to
the Notes, that are assumed by the transferee of any such assets
and for which the Issuer and all of its Restricted Subsidiaries
have been validly released by all creditors in writing,
(b) any securities received by the Issuer or such
Restricted Subsidiary from such transferee that are converted by
the Issuer or such Restricted Subsidiary into cash (to the
extent of the cash received) within 180 days following the
closing of such Asset Sale, and
(c) any Designated Non-cash Consideration received by the
Issuer or such Restricted Subsidiary in such Asset Sale having
an aggregate fair market value, taken together with all other
Designated Non-cash Consideration received pursuant to this
clause (c) that is at that time outstanding, not to exceed
5% of Total Assets at the time of the receipt of such Designated
Non-cash Consideration, with the fair market value of each item
of Designated Non-cash Consideration being measured at the time
received and without giving effect to subsequent changes in
value,
shall be deemed to be cash for purposes of this provision and
for no other purpose.
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Within 450 days after the receipt of any Net Proceeds of
any Asset Sale, the Issuer or such Restricted Subsidiary, at its
option, may apply the Net Proceeds from such Asset Sale,
(1) to permanently reduce:
(a) Obligations constituting First Lien Obligations (and,
if the Indebtedness repaid is revolving credit Indebtedness, to
correspondingly reduce commitments with respect thereto)
(provided that (x) to the extent that the terms of
First Lien Obligations other than Obligations under the Notes
require that such First Lien Obligations are repaid with the Net
Proceeds of Asset Sales prior to repayment of other
Indebtedness, the Issuer and its Restricted Subsidiaries shall
be entitled to repay such other First Lien Obligations prior to
repaying the Obligations under the Notes and (y) subject to
the foregoing clause (x), if the Issuer or any Guarantor shall
so reduce First Lien Obligations, the Issuer will equally and
ratably reduce Obligations under the Notes through open-market
purchases (provided that such purchases are at or above
100% of the principal amount thereof) or by making an offer (in
accordance with the procedures set forth below for an Asset Sale
Offer) to all Holders to purchase at a purchase price equal to
100% of the principal amount thereof, plus accrued and unpaid
interest and additional interest, if any, on the pro rata
principal amount of Notes);
(b) Obligations under the Existing Notes which have a final
maturity date (as in effect on the Issue Date) on or prior to
the maturity date of the Notes; provided that, at the
time of, and after giving effect to, such repurchase, redemption
or defeasance, the aggregate amount of Net Proceeds used to
repurchase, redeem or defease Existing Notes pursuant to this
subclause (b) following the Issue Date shall not exceed 5%
of the consolidated total assets of the Issuer and is
subsidiaries at such time; or
(c) Indebtedness of a Restricted Subsidiary that is not a
Guarantor, other than Indebtedness owed to the Issuer or another
Restricted Subsidiary (or any affiliate thereof);
(2) to make (a) an Investment in any one or more
businesses, provided that such Investment in any business
is in the form of the acquisition of Capital Stock and results
in the Issuer or another of its Restricted Subsidiaries, as the
case may be, owning an amount of the Capital Stock of such
business such that it constitutes a Restricted Subsidiary,
(b) capital expenditures or (c) acquisitions of other
assets, in each of (a), (b) and (c), used or useful in a
Similar Business; or
(3) to make an investment in (a) any one or more
businesses, provided that such Investment in any business
is in the form of the acquisition of Capital Stock and results
in the Issuer or another of its Restricted Subsidiaries, as the
case may be, owning an amount of the Capital Stock of such
business such that it constitutes a Restricted Subsidiary,
(b) properties or (c) acquisitions of other assets
that, in each of (a), (b) and (c), replace the businesses,
properties
and/or
assets that are the subject of such Asset Sale;
provided that, in the case of clauses (2) and
(3) above, a binding commitment shall be treated as a
permitted application of the Net Proceeds from the date of such
commitment so long as the Issuer, or such other Restricted
Subsidiary enters into such commitment with the good faith
expectation that such Net Proceeds will be applied to satisfy
such commitment within 180 days of such commitment (an
Acceptable Commitment) and, in the event any
Acceptable Commitment is later cancelled or terminated for any
reason before the Net Proceeds are applied
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in connection therewith, the Issuer or such Restricted
Subsidiary enters into another Acceptable Commitment (a
Second Commitment) within 180 days of
such cancellation or termination; provided,
further, that if any Second Commitment is later cancelled
or terminated for any reason before such Net Proceeds are
applied, then such Net Proceeds shall constitute Excess Proceeds.
Any Net Proceeds from Asset Sales of Collateral that are not
invested or applied as set forth in the first sentence of the
preceding paragraph will be deemed to constitute
Collateral Excess Proceeds. When the
aggregate amount of Collateral Excess Proceeds exceeds
$200.0 million, the Issuer shall make an offer to all
Holders of the Notes and, if required by the terms of any First
Lien Obligations or Obligations secured by a Lien permitted
under the Indenture (which Lien is not subordinate to the Lien
of the Notes with respect to the Collateral), to the holders of
such First Lien Obligations or such other Obligations (a
Collateral Asset Sale Offer), to purchase the
maximum aggregate principal amount of the Notes and such First
Lien Obligations or such other Obligations that is a minimum of
$2,000 or an integral multiple of $1,000 in excess thereof that
may be purchased out of the Collateral Excess Proceeds at an
offer price in cash in an amount equal to 100% of the principal
amount thereof, plus accrued and unpaid interest to the date
fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. The Issuer will commence
a Collateral Asset Sale Offer with respect to Collateral Excess
Proceeds within ten Business Days after the date that Collateral
Excess Proceeds exceed $200.0 million by mailing the notice
required pursuant to the terms of the Indenture, with a copy to
the Trustee.
Any Net Proceeds from Asset Sales of non-Collateral that are not
invested or applied as provided and within the time period set
forth in the first sentence of the second preceding paragraph
will be deemed to constitute Excess Proceeds.
When the aggregate amount of Excess Proceeds exceeds
$200.0 million, the Issuer shall make an offer to all
Holders of the Notes and, if required or permitted by the terms
of any Senior Indebtedness, to the holders of such Senior
Indebtedness (an Asset Sale Offer), to
purchase the maximum aggregate principal amount of the Notes and
such Senior Indebtedness that is a minimum of $2,000 or an
integral multiple of $1,000 in excess thereof that may be
purchased out of the Excess Proceeds at an offer price in cash
in an amount equal to 100% of the principal amount thereof, plus
accrued and unpaid interest to the date fixed for the closing of
such offer, in accordance with the procedures set forth in the
Indenture. The Issuer will commence an Asset Sale Offer with
respect to Excess Proceeds within ten Business Days after the
date that Excess Proceeds exceed $200.0 million by mailing
the notice required pursuant to the terms of the Indenture, with
a copy to the Trustee.
To the extent that the aggregate amount of Notes and such other
First Lien Obligations or Obligations secured by a Lien
permitted by the Indenture (which Lien is not subordinate to the
Lien of the Notes with respect to the Collateral) tendered
pursuant to a Collateral Asset Sale Offer is less than the
Collateral Excess Proceeds, the Issuer may use any remaining
Collateral Excess Proceeds for general corporate purposes,
subject to other covenants contained in the Indenture. To the
extent that the aggregate amount of Notes and such Senior
Indebtedness tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, the Issuer may use any remaining
Excess Proceeds for general corporate purposes, subject to other
covenants contained in the Indenture. If the aggregate principal
amount of Notes or other First Lien Obligations or such other
Obligations surrendered by such holders thereof exceeds the
amount of Collateral Excess Proceeds, the Trustee shall select
the Notes and such other First Lien Obligations or such other
Obligations to be purchased on a pro rata basis based on the
accreted value or principal amount of the Notes or such other
First Lien Obligations or such other Obligations tendered. If
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the aggregate principal amount of Notes or the Senior
Indebtedness surrendered by such holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Notes
and such Senior Indebtedness to be purchased on a pro rata basis
based on the accreted value or principal amount of the Notes or
such Senior Indebtedness tendered. Upon completion of any such
Collateral Asset Sale Offer or Asset Sale Offer, the amount of
Collateral Excess Proceeds or Excess Proceeds, as the case may
be, shall be reset at zero. Additionally, the Issuer may, at its
option, make a Collateral Asset Sale Offer or an Asset Sale
Offer using proceeds from any Asset Sale at any time after
consummation of such Asset Sale; provided that such
Collateral Asset Sale Offer or Asset Sale Offer shall be in an
aggregate amount of not less than $50.0 million. Upon
consummation of such Collateral Asset Sale Offer or Asset Sale
Offer, any Net Proceeds not required to be used to purchase
Notes shall not be deemed Excess Proceeds.
Pending the final application of any Net Proceeds pursuant to
this covenant, the holder of such Net Proceeds may apply such
Net Proceeds temporarily to reduce Indebtedness outstanding
under a revolving credit facility or otherwise invest such Net
Proceeds in any manner not prohibited by the Indenture.
The Issuer will comply with the requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws or regulations
are applicable in connection with the repurchase of the Notes
pursuant to a Collateral Asset Sale Offer or an Asset Sale
Offer. To the extent that the provisions of any securities laws
or regulations conflict with the provisions of the Indenture,
the Issuer will comply with the applicable securities laws and
regulations and shall not be deemed to have breached its
obligations described in the Indenture by virtue thereof.
Selection and
notice
If the Issuer is redeeming less than all of the Notes issued by
it at any time, the Registrar and Paying Agent will select the
Notes to be redeemed (a) if the Notes are listed on any
national securities exchange, in compliance with the
requirements of the principal national securities exchange on
which the Notes are listed, (b) on a pro rata basis to the
extent practicable or (c) by lot or such other similar
method in accordance with the procedures of DTC.
Notices of purchase or redemption shall be mailed by first-class
mail, postage prepaid, at least 30 but not more than
60 days before the purchase or redemption date to each
Holder of Notes at such Holders registered address or
otherwise in accordance with the procedures of DTC, except that
redemption notices may be mailed more than 60 days prior to
a redemption date if the notice is issued in connection with a
defeasance of the Notes or a satisfaction and discharge of the
Indenture. If any Note is to be purchased or redeemed in part
only, any notice of purchase or redemption that relates to such
Note shall state the portion of the principal amount thereof
that has been or is to be purchased or redeemed.
The Issuer will issue a new Note in a principal amount equal to
the unredeemed portion of the original Note in the name of the
Holder upon cancellation of the original Note. Notes called for
redemption become due on the date fixed for redemption. On and
after the redemption date, interest ceases to accrue on Notes or
portions thereof called for redemption.
Certain
covenants
Set forth below are summaries of certain covenants contained in
the Indenture.
S-85
Covenant
suspension
If on any date following the Issue Date (i) the Notes have
Investment Grade Ratings from both Rating Agencies and
(ii) no Default has occurred and is continuing under the
Indenture (the occurrence of the events described in the
foregoing clauses (i) and (ii) being collectively
referred to as a Investment Grade Rating
Event), the Issuer and the Subsidiaries will not be
subject to the Repurchase at the option of
holdersChange of control covenant (the
Suspended Covenant).
In the event that the Issuer and the Subsidiaries are not
subject to the Suspended Covenant under the Indenture for any
period of time as a result of the foregoing, and on any
subsequent date one or both of the Rating Agencies
(a) withdraw their Investment Grade Rating or downgrade the
rating assigned to the Notes below an Investment Grade Rating
and/or
(b) the Issuer or any of its Affiliates enters into an
agreement to effect a transaction that would result in a Change
of Control and one or more of the Rating Agencies indicate that
if consummated, such transaction (alone or together with any
related recapitalization or refinancing transactions) would
cause such Rating Agency to withdraw its Investment Grade Rating
or downgrade the ratings assigned to the Notes below an
Investment Grade Rating, then the Issuer and the Subsidiaries
will thereafter again be subject to the Suspended Covenant under
the Indenture with respect to future events, including, without
limitation, a proposed transaction described in clause (b)
above.
In the event of any such reinstatement, no action taken or
omitted to be taken by the Issuer or any of its Subsidiaries
prior to such reinstatement will give rise to a Default or Event
of Default under the Indenture with respect to Notes.
There can be no assurance that the Notes will ever achieve or
maintain Investment Grade Ratings.
Covenant
termination and release of collateral
If on any date following the Issue Date, an Investment Grade
Rating Event has occurred:
(A) all Collateral securing the Notes shall be released in
accordance with the terms set forth in the Indenture and the
Security Documents;
(B) the Issuer and the Subsidiaries will not be subject to
covenants described under Repurchase at the option
of holdersAsset sales and
Liens; and
(C) only the covenants described below under the caption
Investment Grade Covenants will apply to the
Issuer and become effective upon the occurrence of such an
Investment Grade Rating Event.
There can be no assurance that the Notes will ever achieve or
maintain Investment Grade Ratings.
In addition, if on any date following the Issue Date,
substantially all of the Collateral has been released pursuant
to clause (5) described under
CollateralRelease of collateral:
(A) the Issuer and the Subsidiaries will not be subject to
covenants described under Repurchase at the option
of holdersAsset sales and
Liens; and
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(B) only the covenants described below under the caption
Investment grade covenants will apply to the
Issuer and become effective upon the occurrence of such an event.
Liens
The Issuer will not, and will not permit any Guarantor to,
directly or indirectly, create, incur, assume or suffer to exist
any Lien (except Permitted Liens) that secures obligations under
any Indebtedness or any related guarantee, on any asset or
property of the Issuer or any Guarantor, or any income or
profits therefrom, or assign or convey any right to receive
income therefrom, other than Liens securing Indebtedness that
are junior in priority to the Liens on such property, assets or
proceeds securing the Notes and related Guarantees.
The foregoing shall not apply to (a) Liens securing the
Notes and the related Guarantees, (b) Liens securing
Indebtedness permitted to be incurred under Credit Facilities,
including any letter of credit relating thereto, that was
permitted to be incurred pursuant to clause (1) of the
second paragraph under Limitation on Incurrence of
Indebtedness and Issuance of Disqualified Stock and Preferred
Stock set forth in the Existing Secured Bond Indentures as
in effect on the Issue Date; provided that, with respect
to Liens securing Obligations permitted under this subclause
(b), the Notes and the related Guarantees are secured by Liens
on the assets subject to such Liens (except any European
Collateral) to the extent, with the priority and subject to
intercreditor arrangements, in each case no less favorable to
the Holders of the Notes than those described under
Security above and (c) Liens which are pari
passu in priority to the Liens securing the Notes and
related Guarantees and are incurred to secure Obligations in
respect of any Indebtedness permitted to be incurred pursuant to
the covenant described under Limitation on
Incurrence of Indebtedness and Issuance of Disqualified Stock
and Preferred Stock set forth in the Existing Secured Bond
Indentures as in effect on the Issue Date; provided that,
with respect to Liens securing Obligations permitted under this
subclause (c), at the time of incurrence and after giving pro
forma effect thereto, the ratio of (1) the aggregate amount
of Indebtedness secured by property, assets or proceeds that
secure the Notes and related Guarantees that are subject to a
Lien that is pari passu or senior in priority to the
Liens securing the Notes and the related Guarantees incurred
pursuant to subclause (b) above, this subclause (c)
and clause (6) of the definition of Permitted
Liens (other than Liens securing Indebtedness incurred
pursuant to clauses (4) and (18) of the covenant
described under Limitation on Incurrence of
Indebtedness and Issuance of Disqualified Stock and Preferred
Stock set forth in the Existing Secured Bond Indentures as
in effect on the Issue Date) to (2) the Issuers
EBITDA for the most recently ended four full fiscal quarters for
which internal financial statements are available immediately
preceding the date on which such event for which such
calculation is being made shall occur, in each case with such
pro forma adjustments to Indebtedness and EBITDA as are
appropriate and consistent with the pro forma adjustment
provisions set forth in the definition of Fixed Charge Coverage
Ratio would be no greater than 4.25 to 1.0; provided
that, with respect to Liens securing Obligations permitted
under this subclause (c), the Notes and the related Guarantees
are secured by Liens on the assets subject to such Liens (except
any European Collateral) to the extent, with the priority and
subject to intercreditor arrangements, in each case no less
favorable to the Holders of the Notes than those described under
Security above.
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Investment grade
covenants
The following covenants will be applicable to the Issuer and its
Restricted Subsidiaries upon the occurrence of the events
described above under Certain
covenantsCovenant termination and release of
collateral.
Limitations on
mortgages
Nothing in the Indenture or in the Notes shall in any way
restrict or prevent the Issuer, the Parent Guarantor or any
Subsidiary from incurring any Indebtedness, provided,
however, that the Indenture will provide that neither the
Issuer nor any of its Subsidiaries will issue, assume or
guarantee any indebtedness or obligation secured by Mortgages
upon any Principal Property, unless the Notes shall be secured
equally and ratably with (or prior to) such Indebtedness. This
restriction will not apply to:
(a) Mortgages securing all or any part of the purchase
price of property acquired or cost of construction of property
or cost of additions, substantial repairs, alterations or
improvements or property, if the Indebtedness and the related
Mortgages are incurred within 18 months of the later of the
acquisition or completion of construction and full operation or
additions, repairs, alterations or improvements;
(b) Mortgages existing on property at the time of its
acquisition by the Issuer or a Subsidiary or on the property of
a Person at the time of the acquisition of such Person by the
Issuer or a Subsidiary (including acquisitions through merger or
consolidation);
(c) Mortgages to secure Indebtedness on which the interest
payments to holders of the related indebtedness are excludable
from gross income for federal income tax purposes under
Section 103 of the Code;
(d) Mortgages in favor of the Issuer or any Subsidiary;
(e) Mortgages existing on the date of the Indenture;
(f) Mortgages in favor of a government or governmental
entity that (i) secure Indebtedness which is guaranteed by
the government or governmental entity, (ii) secure
Indebtedness incurred to finance all or some of the purchase
price or cost of construction of goods, products or facilities
produced under contract or subcontract for the government or
governmental entity, or (iii) secure Indebtedness incurred
to finance all or some of the purchase price or cost of
construction of the property subject to the Mortgage;
(g) Mortgages incurred in connection with the borrowing of
funds where such funds are used to repay within 120 days
after entering into such Mortgage, Indebtedness in the same
principal amount secured by other Mortgages on Principal
Property with at least the same appraised fair market value; and
(h) any extension, renewal or replacement of any Mortgage
referred to in clauses (a) through (g) above, provided
the amount secured is not increased and such extension, renewal
or replacement Mortgage relates to the same property.
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Limitations on
sale and lease-back
The Indenture will provide that neither the Issuer nor any
Subsidiary will enter into any Sale and Lease-Back Transaction
with respect to any Principal Property with another person
(other than with the Issuer or a Subsidiary) unless either:
(a) the Issuer or such Subsidiary could incur indebtedness
secured by a mortgage on the property to be leased without
equally and ratably securing the Notes; or
(b) within 120 days, the Issuer applies the greater of
the net proceeds of the sale of the leased property or the fair
value of the leased property, net of all Notes delivered under
the Indenture, to the voluntary retirement of our Funded Debt
and/or the
acquisition or construction of a Principal Property.
Exempted
transactions
Notwithstanding the foregoing provisions described above under
Limitation on mortgages and
Limitations on sale and lease-back if the
aggregate outstanding principal amount of all Indebtedness of
the Issuer and its Subsidiaries that is subject to and not
otherwise permitted under these restrictions does not exceed 15%
of the Consolidated Net Tangible Assets of the Issuer and its
Subsidiaries, then:
(a) the Issuer or any of its Subsidiaries may issue, assume
or guarantee Indebtedness secured by Mortgages; and
(b) the Issuer or any of its Subsidiaries may enter into
any Sale and Lease-Back Transaction.
Events of
default
Under the Indenture, an Event of Default
applicable to the Notes of any series means:
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failure to pay the principal or any premium on the Notes when
due;
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failure to pay any interest on the Notes when due, and such
default continues for a period of 30 days;
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failure to deposit any sinking fund payment in respect of the
Notes when due;
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failure to perform, or the breach of, any of our other
applicable covenants or warranties in the Indenture, and such
default continues for a period of 60 days after written
notice by Holders of at least 10% in principal amount of the
outstanding Notes;
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events in bankruptcy, insolvency or reorganization;
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the Guarantee of any Significant Subsidiary shall for any reason
cease to be in full force and effect or be declared null and
void or any responsible officer of any Guarantor that is a
Significant Subsidiary, as the case may be, denies that it has
any further liability under its Guarantee or gives notice to
such effect, other than by reason of the termination of the
Indenture or the release of any such Guarantee in accordance
with the Indenture; or
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to the extent applicable, with respect to any Collateral having
a fair market value in excess of $200 million, individually
or in the aggregate, (a) the security interest under the
Security Documents, at any time, ceases to be in full force and
effect for any reason other than in accordance with the terms of
the Indenture, the Security Documents and the Intercreditor
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Agreements, (b) any security interest created thereunder or
under the Indenture is declared invalid or unenforceable by a
court of competent jurisdiction or (c) the Issuer or any
Guarantor asserts, in any pleading in any court of competent
jurisdiction, that any such security interest is invalid or
unenforceable.
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If any Event of Default with respect to the Notes occurs and is
continuing, either the Trustee or the Holders of at least 25% in
aggregate principal amount of the outstanding Notes may declare
the principal amount of all the Notes to be due and payable
immediately. The Holders may, under certain circumstances,
rescind and annul this acceleration prior to obtaining a
judgment or decree.
Other than the duties of the Trustee during a default to act
with the required standard of care, the Trustee is not obligated
to exercise any of its rights or powers under the Indenture at
the request or direction of any of the Holders unless the
Holders shall have offered to the Trustee indemnity reasonably
satisfactory to it. Subject to these indemnification provisions,
the Holders of a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Notes.
We will furnish the Trustee annually with a statement as to our
performance of certain obligations under the Indenture and as to
any default in our performance.
Modification and
waiver
Without holder
consent
Without the consent of any Holders, the Issuer, any Guarantor
(with respect to a Guarantee or the Indenture to which it is a
party) and the Trustee may amend or supplement the Indenture,
any Security Document and any Guarantee or Notes for any of the
following purposes:
(1) to evidence the succession of another corporation to
the Issuer and the assumption by such successor of the covenants
of the Issuer in compliance with the requirements set forth in
the Indenture; or
(2) to add to the covenants for the benefit of the Holders
or to surrender any right or power herein conferred upon the
Issuer; or
(3) to add any additional Events of Default; or
(4) to change or eliminate any of the provisions of the
Indenture, provided that any such change or elimination
shall become effective only when there are no outstanding Notes
of any series created prior to the execution of such
supplemental indenture that is entitled to the benefit of such
provision and as to which such supplemental indenture would
apply; or
(5) to add a Guarantor to the Notes; or
(6) to supplement any of the provisions of the Indenture to
such extent necessary to permit or facilitate the defeasance and
discharge of the Notes, provided that any such action
does not adversely affect the interests of the Holders of the
Notes in any material respect; or
(7) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee and to add to or
change any of the provisions of the Indenture necessary to
provide for or facilitate the administration of the trusts by
more than one Trustee; or
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(8) to cure any ambiguity, to correct or supplement any
provision of the Indenture which may be defective or
inconsistent with any other provision; or
(9) to change any place or places where the principal of
and premium, if any, and interest, if any, on the Notes shall be
payable, the Notes may be surrendered for registration or
transfer, the Notes may be surrendered for exchange, and notices
and demands to or upon the Issuer may be served; or
(10) to mortgage, pledge, hypothecate or grant any other
Lien in favor of the Trustee for the benefit of the Holders of
the Notes, as additional security for the payment and
performance of all or any portion of the Obligations, in any
property or assets, including any which are required to be
mortgaged, pledged or hypothecated, or in which a Lien is
required to be granted to or for the benefit of the Trustee or
the Collateral Agent pursuant to the Indenture, any of the
Security Documents or otherwise; or
(11) to release Collateral from the Lien of the Indenture
and the Security Documents when permitted or required by the
Security Documents or the Indenture; or
(12) to add Additional First Lien Secured Parties or
additional ABL Secured Parties, to any Security Documents in
accordance with such Security Documents.
With holder
consent
The Issuer and the Trustee may modify and amend the Indenture,
any Guarantee or any Security Document with the consent of the
Holders of a majority in aggregate principal amount of the
outstanding Notes; however, we must have the consent of the
Holder of each outstanding Note affected to:
(1) change the stated maturity of the principal of, or
installment of interest, if any, on, the Notes, or reduce the
principal amount thereof or the interest thereon or any premium
payable upon redemption thereof;
(2) change the currency in which the principal of (and
premium, if any) or interest on such Notes are denominated or
payable, or reduce the amount of the principal of a Discount
Security that would be due and payable upon a declaration of
acceleration of the maturity thereof;
(3) adversely affect the right of repayment or repurchase,
if any, at the option of the Holder after such obligation
arises, or reduce the amount of, or postpone the date fixed for,
any payment under any sinking fund or impair the right to
institute suit for the enforcement of any payment on or after
the Stated Maturity thereof (or, in the case of redemption, on
or after the redemption date);
(4) reduce the percentage of Holders whose consent is
required for modification or amendment of the Indenture or for
waiver of compliance with certain provisions of the Indenture or
certain defaults;
(5) modify the provisions that require Holder consent to
modify or amend the Indenture or that permit Holders to waive
compliance with certain provisions of the Indenture or certain
defaults;
(6) make any change to or modify the ranking of the Notes
or the subordination of the Liens with respect to the Notes that
would adversely affect the Holders; or
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(7) except as expressly permitted by the Indenture, modify
the Guarantees of any Significant Subsidiary in any manner
adverse to the Holders of the Notes.
In addition, without the consent of at least 75% in aggregate
principal amount of Notes then outstanding, an amendment,
supplement or waiver may not:
(1) modify any Security Document or the provisions of the
Indenture dealing with the Security Documents or application of
trust moneys, or otherwise release any Collateral, in any manner
materially adverse to the Holders other than in accordance with
the Indenture, the Security Documents and the Intercreditor
Agreements; or
(2) modify any Intercreditor Agreement in any manner
materially adverse to the Holders other than in accordance with
the Indenture, the Security Documents and the Intercreditor
Agreements.
The Holders of a majority in aggregate principal amount of the
outstanding Notes may, on behalf of all Holders, waive any past
default under the Indenture with respect to Notes. However, such
Holders may not waive a past default in the payment of
principal, premium or interest, or any sinking fund installment
with respect to the Notes, or waive a covenant or provision that
cannot be modified or amended, without the consent of the
Holders of each outstanding Note affected.
Consolidation,
merger, sale or lease of assets
The Issuer may consolidate with or merge into, or transfer or
lease all or substantially all of its assets to another Person
(whether or not the Issuer is the surviving corporation) without
the consent of the Holders of the Notes under the Indenture if:
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the successor entity assumes the Issuers obligations on
the Notes and under the Indenture, as if such successor were an
original party to the Indenture;
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after giving effect to the transaction, no Event of Default, and
no event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be
continuing;
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if, as a result of any such consolidation or merger or such
conveyance, transfer or lease, properties or assets of the
Issuer would become subject to a mortgage, pledge, lien,
security interest or other encumbrance that would not be
permitted by the Indenture, the Issuer or such successor
corporation or Person, as the case may be, shall take such steps
as shall be necessary effectively to secure all the Notes
equally and ratably with (or prior to) all indebtedness secured
thereby;
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each Guarantor, unless it is the other party to the transactions
described above, shall have by supplemental indenture confirmed
that its Guarantee shall apply to such Persons obligations
under the Indenture and the Notes;
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the Collateral owned by the successor entity will
(a) continue to constitute Collateral under the Indenture
and the Security Documents, (b) be subject to a Lien in
favor of the First Lien Collateral Agent for the benefit of the
Trustee and the Holders of the Notes and (c) not be subject
to any other Lien, other than Permitted Liens and other Liens
permitted under the covenant described under
Liens;
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to the extent any assets of the Person which is merged or
consolidated with or into the successor entity are assets of the
type which would constitute Collateral under the Security
Documents, the successor entity will take such action as may be
reasonably necessary to cause such property and assets to be
made subject to the Lien of the Security Documents in the manner
and to the extent required in the Indenture or any of the
Security Documents and shall take all reasonably necessary
action so that such Lien is perfected to the extent required by
the Security Documents; and
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the Issuer has delivered to the Trustee an Officers
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, transfer or lease and such
supplemental indenture comply with this covenant and that all
conditions precedent provided for relating to such transaction
have been complied with.
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Subject to certain limitations described in the Indenture
governing release of a Guarantee upon the sale, disposition or
transfer of a Guarantor, neither the Parent Guarantor nor any
Guarantor (each, a guarantor) will, and the Issuer
will not permit any Guarantor to, consolidate or merge with or
into or wind up into (whether or not the Issuer or such
guarantor is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets, in one or more
related transactions, to any Person unless:
(1) (a) such guarantor is the surviving corporation or
the Person formed by or surviving any such consolidation or
merger (if other than such guarantor) or to which such sale,
assignment, transfer, lease, conveyance or other disposition
will have been made is a corporation, partnership, limited
partnership, limited liability corporation or trust organized or
existing under the laws of the jurisdiction of organization of
such Guarantor, as the case may be, or the laws of the United
States, any state thereof, the District of Columbia, or any
territory thereof (such guarantor or such Person, as the case
may be, being herein called the Successor
Person);
(b) the Successor Person, if other than such guarantor,
expressly assumes all the obligations of such guarantor under
the Indenture and such guarantors related Guarantee
pursuant to supplemental indentures or other documents or
instruments in form reasonably satisfactory to the Trustee;
(c) immediately after such transaction, no Default
exists; and
(d) the Issuer shall have delivered to the Trustee an
Officers Certificate, each stating that such
consolidation, merger or transfer and such supplemental
indentures, if any, comply with the Indenture; or
(2) the transaction is made in compliance with the covenant
described under Repurchase at the option of
holdersAsset sales.
Subject to certain limitations described in the Indenture, the
Successor Person will succeed to, and be substituted for, such
guarantor under the Indenture and such guarantors
guarantee. Notwithstanding the foregoing, any guarantor may
(i) merge into or transfer all or part of its properties
and assets to another guarantor or the Issuer, (ii) merge
with an Affiliate of the Company solely for the purpose of
reincorporating the guarantor in the United States, any state
thereof, the District of Columbia or any territory thereof or
(iii) convert into a corporation, partnership, limited
partnership, limited liability corporation or trust organized or
existing under the laws of the jurisdiction of organization of
such guarantor.
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Defeasance
We may be discharged from our obligations under the Notes, and
we will not be subject to the limitations in the Indenture
discussed in the above sections, if we deposit with the Trustee
trust money or U.S. government obligations that are
sufficient to pay all principal, premium and interest on the
Notes. We would deliver to the Trustee an opinion of counsel to
the effect that the deposit and related defeasance would not
(1) cause the Holders of the Notes to recognize income,
gain or loss for United States income tax purposes or
(2) result in the delisting of the Notes from any national
securities exchange (if so listed).
Notices
Notices to Holders will be mailed to the addresses of the
holders listed in the security register.
Governing
law
We will construe the Indenture and the Notes in accordance with
the laws of the State of New York.
Concerning the
trustee
The Trustee has normal banking relationships with us.
Certain
definitions
2006 Second Priority Notes means the
$1,000,000,000 aggregate principal amount of
91/8% Senior
Secured Notes due 2014, the $3,200,000,000 aggregate principal
amount of
91/4% Senior
Secured Notes due 2016 and the $1,500,000,000
95/8%/103/8% Senior
Secured Toggle Notes due 2016, each issued by the Issuer under
the 2006 Second Priority Notes Indenture.
2006 Second Priority Notes Indenture means
that certain Indenture, dated as of November 17, 2006,
among the Issuer, the guarantors named on Schedule I
thereto and The Bank of New York Mellon, as trustee.
2009 Second Priority Notes means the
$310,000,000 aggregate principal amount of
97/8% Senior
Secured Notes due 2017, issued by the Issuer under the 2009
Second Priority Notes Indenture.
2009 Second Priority Notes Indenture means
that certain Indenture, dated as of February 19, 2009,
among the Issuer, the guarantors named on Schedule I
thereto, The Bank of New York Mellon Trust Company, N.A.,
as trustee, and The Bank of New York Mellon, as collateral agent.
ABL Facility means the Amended and Restated
Asset-Based Revolving Credit Agreement, dated as of
June 20, 2007, by and among the Issuer, the lenders party
thereto in their capacities as lenders thereunder and Bank of
America, N.A., as Administrative Agent, as amended as of
March 2, 2009, including any guarantees, collateral
documents, instruments and agreements executed in connection
therewith, and any amendments, supplements, modifications,
extensions, renewals, restatements, refundings or refinancings
thereof and any indentures or credit facilities or commercial
paper facilities with banks or other institutional lenders or
investors that replace, refund or refinance any part of the
loans, notes, other credit facilities or commitments thereunder,
including any such replacement, refunding or refinancing
facility or
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indenture that increases the amount borrowable thereunder or
alters the maturity thereof (provided that such increase
in borrowings is permitted under the covenant described under
Limitation on Incurrence of Indebtedness and
Issuance of Disqualified Stock and Preferred Stock set
forth in the Existing Secured Bond Indentures as in effect on
the Issue Date).
ABL Financing Entity means the Issuer and
certain of its subsidiaries from time to time named as borrowers
or guarantors under the ABL Facility.
ABL Obligations means Obligations under the
ABL Facility.
ABL Secured Parties means each of
(i) the ABL Collateral Agent on behalf of itself and the
lenders under the ABL Facility and lenders or their affiliates
counterparty to related Hedging Obligations and (ii) each
other holder of ABL Obligations.
Additional First Lien Obligations shall have
the meaning given such term by the Security Agreement and shall
include the Notes Obligations.
Additional First Lien Secured Party means the
holders of any Additional First Lien Obligations, including the
Holders, and any Authorized Representative with respect thereto,
including the Trustee.
Additional General Intercreditor Agreement
has the meaning set forth under
SecurityAdditional general intercreditor
agreement.
Additional Receivables Intercreditor
Agreement has the meaning set forth under
SecurityAdditional receivables intercreditor
agreement.
Affiliate of any specified Person means any
other Person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified
Person. For purposes of this definition, control
(including, with correlative meanings, the terms
controlling, controlled by and
under common control with), as used with respect to
any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of
voting securities, by agreement or otherwise.
Affiliated Entity means any Person which
(i) does not transact any substantial portion of its
business or regularly maintain any substantial portion of its
operating assets within the continental limits of the United
States of America, (ii) is principally engaged in the
business of financing (including, without limitation, the
purchase, holding, sale or discounting of or lending upon any
notes, contracts, leases or other forms of obligations) the sale
or lease of merchandise, equipment or services (1) by the
Issuer, (2) by a Subsidiary (whether such sales or leases
have been made before or after the date which such Person became
a Subsidiary), (3) by another Affiliated Entity or
(4) by any Person prior to the time which substantially all
its assets have heretofore been or shall hereafter have been
acquired by the Issuer, (iii) is principally engaged in the
business of owning, leasing, dealing in or developing real
property, (iv) is principally engaged in the holding of
stock in,
and/or the
financing of operations of, an Affiliated Entity, or (v) is
principally engaged in the business of (1) offering health
benefit products or (2) insuring against professional and
general liability risks of the Issuer.
Applicable Authorized Representative means,
with respect to any Common Collateral, (i) until the
earlier of (x) the Discharge of General Credit Facility
Obligations and (y) the Non-Controlling Authorized
Representative Enforcement Date, the administrative agent under
the General Credit Facility and (ii) from and after the
earlier of (x) the Discharge of General Credit Facility
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Obligations and (y) the Non-Controlling Authorized
Representative Enforcement Date, the Major Non-Controlling
Authorized Representative.
Asset Sale means:
(1) the sale, conveyance, transfer or other disposition,
whether in a single transaction or a series of related
transactions, of property or assets (including by way of a Sale
and Lease-Back Transaction) of the Issuer or any of its
Restricted Subsidiaries (each referred to in this definition as
a disposition); or
(2) the issuance or sale of Equity Interests of any
Restricted Subsidiary, whether in a single transaction or a
series of related transactions (other than Preferred Stock of
Restricted Subsidiaries issued in compliance with the covenant
described under Limitation on Incurrence of
Indebtedness and Issuance of Disqualified Stock and Preferred
Stock set forth in the Existing Secured Bond Indentures as
in effect on the Issue Date);
in each case, other than:
(a) any disposition of Cash Equivalents or Investment Grade
Securities or obsolete or worn out equipment in the ordinary
course of business or any disposition of inventory or goods (or
other assets) held for sale in the ordinary course of business;
(b) the disposition of all or substantially all of the
assets of the Issuer in a manner permitted pursuant to the
provisions described above under Certain
CovenantsConsolidation, merger, sale or lease of
assets or any disposition that constitutes a Change of
Control pursuant to the Indenture;
(c) the making of any Restricted Payment or Permitted
Investment that is permitted to be made, and is made, under the
covenant described under Limitation on Restricted
Payments set forth in the Existing Secured Bond Indentures
as in effect on the Issue Date;
(d) any disposition of assets or issuance or sale of Equity
Interests of any Restricted Subsidiary in any transaction or
series of related transactions with an aggregate fair market
value of less than $100.0 million;
(e) any disposition of property or assets or issuance of
securities by a Restricted Subsidiary of the Issuer to the
Issuer or by the Issuer or a Restricted Subsidiary of the Issuer
to another Restricted Subsidiary of the Issuer;
(f) to the extent allowable under Section 1031 of the
Code or any comparable or successor provision, any exchange of
like property (excluding any boot thereon) for use in a Similar
Business;
(g) the lease, assignment or
sub-lease of
any real or personal property in the ordinary course of business;
(h) any issuance or sale of Equity Interests in, or
Indebtedness or other securities of, an Unrestricted Subsidiary;
(i) foreclosures on assets;
(j) sales of accounts receivable, or participations
therein, in connection with the ABL Facility or any Receivables
Facility;
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(k) any financing transaction with respect to property
built or acquired by the Issuer or any Restricted Subsidiary
after November 17, 2006, including Sale and Lease-Back
Transactions and asset securitizations permitted by the
Indenture;
(l) dispositions in the ordinary course of business by any
Restricted Subsidiary (including, without limitation, HCI)
engaged in the insurance business in order to provide insurance
to the Issuer and its Subsidiaries;
(m) sales, transfers and other dispositions of Investments
in joint ventures to the extent required by, or made pursuant
to, customary buy/sell arrangements between the joint venture
parties set forth in joint venture arrangements and similar
binding arrangements;
(n) any issuance or sale of Equity Interests or
dispositions in connection with ordinary course syndications of
Subsidiaries or joint ventures owning or operating one or more
health care facilities, including, without limitation,
hospitals, ambulatory surgery centers, outpatient diagnostic
centers or imaging centers in any transaction or series of
related transactions with an aggregate fair market value of less
than $100.0 million; and
(o) any issuance or sale of Equity Interests of any
Restricted Subsidiary (including, without limitation,
HealthTrust Purchasing Group, L.P.) to any Person operating in a
Similar Business for which such Restricted Subsidiary provides
shared purchasing, billing, collection or similar services in
the ordinary course of business.
Asset Sale Offer has the meaning set forth in
the fourth paragraph under Repurchase at the option
of holdersAsset sales.
Authorized Representative means (i) in
the case of any General Credit Facility Obligations or the
General Credit Facility Secured Parties, the administrative
agent under the General Credit Facility, (ii) in the case
of the Existing First Priority Notes Obligations or the Existing
First Priority Notes, Law Debenture Trust Company of New
York, as trustee for the holders of the Existing First Priority
Notes, (iii) in the case of the Notes Obligations or the
Holders, the Trustee and (iv) in the case of any Series of
Additional First Lien Obligations or Additional First Lien
Secured Parties that become subject to the First Lien
Intercreditor Agreement, the Authorized Representative named for
such Series in the applicable joinder agreement.
Bankruptcy Code means Title 11 of the
United States Code, as amended.
Bankruptcy Law means the Bankruptcy Code and
any similar federal, state or foreign law for the relief of
debtors.
Business Day means each day which is not a
Legal Holiday.
Capitalized Lease Obligation means, at the
time any determination thereof is to be made, the amount of the
liability in respect of a capital lease that would at such time
be required to be capitalized and reflected as a liability on a
balance sheet (excluding the footnotes thereto) in accordance
with GAAP.
Capitalized Software Expenditures means, for
any period, the aggregate of all expenditures (whether paid in
cash or accrued as liabilities) by a Person and its Restricted
Subsidiaries during such period in respect of purchased software
or internally developed software and software enhancements that,
in conformity with GAAP, are or are required to be reflected as
capitalized costs on the consolidated balance sheet of a Person
and its Restricted Subsidiaries.
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Capital Stock means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any
and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or
limited); and
(4) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person.
Cash Equivalents means:
(1) United States dollars;
(2) euros or any national currency of any participating
member state of the EMU or such local currencies held by the
Company and its Restricted Subsidiaries from time to time in the
ordinary course of business;
(3) securities issued or directly and fully and
unconditionally guaranteed or insured by the
U.S. government (or any agency or instrumentality thereof
the securities of which are unconditionally guaranteed as a full
faith and credit obligation of the U.S. government) with
maturities of 24 months or less from the date of
acquisition;
(4) certificates of deposit, time deposits and eurodollar
time deposits with maturities of one year or less from the date
of acquisition, bankers acceptances with maturities not
exceeding one year and overnight bank deposits, in each case
with any commercial bank having capital and surplus of not less
than $500.0 million in the case of U.S. banks and
$100.0 million (or the U.S. dollar equivalent as of
the date of determination) in the case of
non-U.S. banks;
(5) repurchase obligations for underlying securities of the
types described in clauses (3) and (4) entered into
with any financial institution meeting the qualifications
specified in clause (4) above;
(6) commercial paper rated at least
P-1 by
Moodys or at least
A-1 by
S&P and in each case maturing within 24 months after
the date of creation thereof;
(7) marketable short-term money market and similar
securities having a rating of at least
P-2 or
A-2 from
either Moodys or S&P, respectively (or, if at any
time neither Moodys nor S&P shall be rating such
obligations, an equivalent rating from another Rating Agency)
and in each case maturing within 24 months after the date
of creation thereof;
(8) investment funds investing 95% of their assets in
securities of the types described in clauses (1) through
(7) above;
(9) readily marketable direct obligations issued by any
state, commonwealth or territory of the United States or any
political subdivision or taxing authority thereof having an
Investment Grade Rating from either Moodys or S&P
with maturities of 24 months or less from the date of
acquisition;
(10) Indebtedness or Preferred Stock issued by Persons with
a rating of A or higher from S&P or A2 or higher from
Moodys with maturities of 24 months or less from the
date of acquisition; and
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(11) Investments with average maturities of 24 months
or less from the date of acquisition in money market funds rated
AAA- (or the equivalent thereof) or better by S&P or Aaa3
(or the equivalent thereof) or better by Moodys.
Notwithstanding the foregoing, Cash Equivalents shall include
amounts denominated in currencies other than those set forth in
clauses (1) and (2) above; provided that such
amounts are converted into any currency listed in
clauses (1) and (2) as promptly as practicable and in
any event within ten Business Days following the receipt of such
amounts.
Change of Control means the occurrence of any
of the following:
(1) the sale, lease or transfer, in one or a series of
related transactions, of all or substantially all of the assets
of the Issuer and its Subsidiaries, taken as a whole, to any
Person other than a Permitted Holder; or
(2) the Issuer becomes aware (by way of a report or any
other filing pursuant to Section 13(d) of the Exchange Act,
proxy, vote, written notice or otherwise) of the acquisition by
any Person or group (within the meaning of Section 13(d)(3)
or Section 14(d)(2) of the Exchange Act, or any successor
provision), including any group acting for the purpose of
acquiring, holding or disposing of securities (within the
meaning of Rule
13d-5(b)(1)
under the Exchange Act), other than the Permitted Holders, in a
single transaction or in a related series of transactions, by
way of merger, consolidation or other business combination or
purchase of beneficial ownership (within the meaning of
Rule 13d-3
under the Exchange Act, or any successor provision) of 50% or
more of the total voting power of the Voting Stock of the Issuer
or any of its direct or indirect parent companies holding
directly or indirectly 100% of the total voting power of the
Voting Stock of the Issuer.
Code means the Internal Revenue Code of 1986,
as amended, or any successor thereto.
Collateral means, collectively, the Shared
Receivables Collateral and Non-Receivables Collateral.
Collateral Asset Sale Offer has the meaning
set forth in the third paragraph under Repurchase at
the option of holdersAsset sales.
Collateral Excess Proceeds has the meaning
set forth in the third paragraph under Repurchase at
the option of holdersAsset sales.
Common Collateral means, at any time,
Collateral in which the holders of two or more Series of First
Lien Obligations (or their respective Authorized
Representatives) hold a valid and perfected security interest at
such time. If more than two Series of First Lien Obligations are
outstanding at any time and the holders of less than all Series
of First Lien Obligations hold a valid and perfected security
interest in any Collateral at such time then such Collateral
shall constitute Common Collateral for those Series of First
Lien Obligations that hold a valid security interest in such
Collateral at such time and shall not constitute Common
Collateral for any Series which does not have a valid and
perfected security interest in such Collateral at such time.
Consolidated Depreciation and Amortization
Expense means with respect to any Person for any
period, the total amount of depreciation and amortization
expense, including the amortization of deferred financing fees,
debt issuance costs, commissions, fees and expenses and
Capitalized Software Expenditures, of such Person and its
Restricted Subsidiaries for such period on a consolidated basis
and otherwise determined in accordance with GAAP.
S-99
Consolidated Interest Expense means, with
respect to any Person for any period, without duplication, the
sum of:
(1) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, to the extent such
expense was deducted (and not added back) in computing
Consolidated Net Income (including (a) amortization of
original issue discount resulting from the issuance of
Indebtedness at less than par, (b) all commissions,
discounts and other fees and charges owed with respect to
letters of credit or bankers acceptances,
(c) non-cash interest payments (but excluding any non-cash
interest expense attributable to the movement in the mark to
market valuation of Hedging Obligations or other derivative
instruments pursuant to GAAP), (d) the interest component
of Capitalized Lease Obligations, and (e) net payments, if
any, pursuant to interest rate Hedging Obligations with respect
to Indebtedness, and excluding (u) accretion or accrual of
discounted liabilities not constituting Indebtedness,
(v) any expense resulting from the discounting of the
Existing Notes or other Indebtedness in connection with the
application of recapitalization accounting or, if applicable,
purchase accounting, (w) any additional
interest with respect to other securities,
(x) amortization of deferred financing fees, debt issuance
costs, commissions, fees and expenses, (y) any expensing of
bridge, commitment and other financing fees and
(z) commissions, discounts, yield and other fees and
charges (including any interest expense) related to any
Receivables Facility); plus
(2) consolidated capitalized interest of such Person and
its Restricted Subsidiaries for such period, whether paid or
accrued; less
(3) interest income for such period.
For purposes of this definition, interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate
reasonably determined by such Person to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance with
GAAP.
Consolidated Net Income means, with respect
to any Person for any period, the aggregate of the Net Income of
such Person for such period, on a consolidated basis, and
otherwise determined in accordance with GAAP; provided,
however, that, without duplication,
(1) any after-tax effect of extraordinary, non-recurring or
unusual gains or losses (less all fees and expenses relating
thereto) or expenses, severance, relocation costs, consolidation
and closing costs, integration and facilities opening costs,
business optimization costs, transition costs, restructuring
costs, signing, retention or completion bonuses, and
curtailments or modifications to pension and post-retirement
employee benefit plans shall be excluded,
(2) the cumulative effect of a change in accounting
principles during such period shall be excluded,
(3) any after-tax effect of income (loss) from disposed,
abandoned or discontinued operations and any net after-tax gains
or losses on disposal of disposed, abandoned, transferred,
closed or discontinued operations shall be excluded,
(4) any after-tax effect of gains or losses (less all fees
and expenses relating thereto) attributable to asset
dispositions or abandonments other than in the ordinary course
of business, as determined in good faith by the Issuer, shall be
excluded,
S-100
(5) the Net Income for such period of any Person that is an
Unrestricted Subsidiary shall be excluded; provided that
Consolidated Net Income of the Issuer shall be increased by the
amount of dividends or distributions or other payments that are
actually paid in cash (or to the extent converted into cash) to
the referent Person or a Restricted Subsidiary thereof in
respect of such period,
(6) [Reserved]
(7) effects of adjustments (including the effects of such
adjustments pushed down to the Issuer and its Restricted
Subsidiaries) in the property, equipment, inventory, software
and other intangible assets, deferred revenues and debt line
items in such Persons consolidated financial statements
pursuant to GAAP resulting from the application of
recapitalization accounting or, if applicable, purchase
accounting in relation to the Transaction or any consummated
acquisition or the amortization or write-off of any amounts
thereof, net of taxes, shall be excluded,
(8) any after-tax effect of income (loss) from the early
extinguishment of Indebtedness or Hedging Obligations or other
derivative instruments shall be excluded,
(9) any impairment charge or asset write-off, including,
without limitation, impairment charges or asset write-offs
related to intangible assets, long-lived assets or investments
in debt and equity securities, in each case, pursuant to GAAP
and the amortization of intangibles arising pursuant to GAAP
shall be excluded,
(10) any non-cash compensation expense recorded from grants
of stock appreciation or similar rights, stock options,
restricted stock or other rights, and any cash charges
associated with the rollover, acceleration or payout of Equity
Interests by management of the Company or any of its direct or
indirect parent companies in connection with the Transaction,
shall be excluded,
(11) any fees and expenses incurred during such period, or
any amortization thereof for such period, in connection with any
acquisition, Investment, asset sale, issuance or repayment of
any Indebtedness, issuance of Equity Interests, refinancing
transaction or amendment or modification of any debt instrument
(in each case, including any such transaction consummated prior
to the Issue Date and any such transaction undertaken but not
completed) and any charges or non-recurring merger costs
incurred during such period as a result of any such transaction
shall be excluded,
(12) accruals and reserves that are established or adjusted
within twelve months after November 17, 2006 that are so
required to be established as a result of the Transaction in
accordance with GAAP, or changes as a result of adoption or
modification of accounting policies, shall be excluded, and
(13) to the extent covered by insurance and actually
reimbursed, or, so long as the Issuer has made a determination
that there exists reasonable evidence that such amount will in
fact be reimbursed by the insurer and only to the extent that
such amount is (a) not denied by the applicable carrier in
writing within 180 days and (b) in fact reimbursed
within 365 days of the date of such evidence (with a
deduction for any amount so added back to the extent not so
reimbursed within 365 days), expenses with respect to
liability or casualty events or business interruption shall be
excluded.
S-101
Consolidated Net Tangible Assets means, with
respect to any Person, the total amount of assets (less
applicable reserves and other properly deductible items) after
deducting therefrom (a) all current liabilities as
disclosed on the consolidated balance sheet of such Person
(excluding any thereof which are by their terms extendible or
renewable at the option of the obligor thereon to a time more
than 12 months after the time as of which the amount
thereof is being computed and further excluding any deferred
income taxes that are included in current liabilities) and
(b) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangible
assets, all as set forth on the most recent consolidated balance
sheet of the Issuer and computed in accordance with generally
accepted accounting principles.
Contingent Obligations means, with respect to
any Person, any obligation of such Person guaranteeing any
leases, dividends or other obligations that do not constitute
Indebtedness (primary obligations) of any other
Person (the primary obligor) in any manner, whether
directly or indirectly, including, without limitation, any
obligation of such Person, whether or not contingent,
(1) to purchase any such primary obligation or any property
constituting direct or indirect security therefor,
(2) to advance or supply funds
(a) for the purchase or payment of any such primary
obligation, or
(b) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, or
(3) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment
of such primary obligation against loss in respect thereof.
Controlling Secured Parties means, with
respect to any Common Collateral, the Series of First Lien
Secured Parties whose Authorized Representative is the
Applicable Authorized Representative for such Common Collateral.
Credit Facilities means, with respect to the
Issuer or any of its Restricted Subsidiaries, one or more debt
facilities, including the Senior Credit Facilities, or other
financing arrangements (including, without limitation,
commercial paper facilities or indentures) providing for
revolving credit loans, term loans, letters of credit or other
long-term indebtedness, including any notes, mortgages,
guarantees, collateral documents, instruments and agreements
executed in connection therewith, and any amendments,
supplements, modifications, extensions, renewals, restatements
or refundings thereof and any indentures or credit facilities or
commercial paper facilities that replace, refund or refinance
any part of the loans, notes, other credit facilities or
commitments thereunder, including any such replacement,
refunding or refinancing facility or indenture that increases
the amount permitted to be borrowed thereunder or alters the
maturity thereof (provided that such increase in
borrowings is permitted under the covenant described under
Limitation on Incurrence of Indebtedness and
Issuance of Disqualified Stock and Preferred Stock set
forth in the Existing Secured Bond Indentures as in effect on
the Issue Date) or adds Restricted Subsidiaries as additional
borrowers or guarantors thereunder and whether by the same or
any other agent, lender or group of lenders.
S-102
Default means any event that is, or with the
passage of time or the giving of notice or both would be, an
Event of Default.
Designated Non-cash Consideration means the
fair market value of non-cash consideration received by the
Issuer or a Restricted Subsidiary in connection with an Asset
Sale that is so designated as Designated Non-cash Consideration
pursuant to an Officers Certificate, setting forth the
basis of such valuation, executed by the principal financial
officer of the Issuer, less the amount of cash or Cash
Equivalents received in connection with a subsequent sale of or
collection on such Designated Non-cash Consideration.
Designated Preferred Stock means Preferred
Stock of the Issuer or any parent corporation thereof (in each
case other than Disqualified Stock) that is issued for cash
(other than to a Restricted Subsidiary or an employee stock
ownership plan or trust established by the Issuer or any of its
Subsidiaries) and is so designated as Designated Preferred
Stock, pursuant to an Officers Certificate executed by the
principal financial officer of the Issuer or the applicable
parent corporation thereof, as the case may be, on the issuance
date thereof, the cash proceeds of which are excluded from the
calculation set forth in clause (3) of the first paragraph
under the covenant described under Limitation on
Restricted Payments set forth in the Existing Secured Bond
Indentures as in effect on the Issue Date.
Discharge of General Credit Facility
Obligations means, with respect to any Common
Collateral, the date on which the General Credit Facility
Obligations are no longer secured by such Common Collateral;
provided that the Discharge of General Credit Facility
Obligations shall not be deemed to have occurred in connection
with a refinancing of such General Credit Facility Obligations
with additional First Lien Obligations secured by such Common
Collateral under an agreement relating to Additional First Lien
Obligations which has been designated in writing by the
administrative agent under the General Credit Facility so
refinanced to the First Lien Collateral Agent and each other
Authorized Representative as the General Credit Facility for
purposes of the First Lien Intercreditor Agreement.
Discharge of New First Lien Obligations
means, except to the extent any such New First Lien Obligations
are reinstated pursuant to the Additional General Intercreditor
Agreement, the discharge or legal defeasance or covenant
defeasance of the Indenture in accordance with its terms;
provided that the Discharge of New First Lien Obligations
shall not be deemed to have occurred if such payments are made
with proceeds of other New First Lien Obligations that
constitute an exchange or replacement for or a refinancing, in
whole or in part, of such New First Lien Obligations. In the
event the New First Lien Obligations are modified and such
Obligations are paid over time or otherwise modified pursuant to
Section 1129 of the Bankruptcy Code, the New First Lien
Obligations shall be deemed to be discharged when the final
payment is made, in cash, in respect of such indebtedness and
any obligations pursuant to such new indebtedness shall have
been satisfied.
Disqualified Stock means, with respect to any
Person, any Capital Stock of such Person which, by its terms, or
by the terms of any security into which it is convertible or for
which it is putable or exchangeable, or upon the happening of
any event, matures or is mandatorily redeemable (other than
solely as a result of a change of control or asset sale)
pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof (other than
solely as a result of a change of control or asset sale), in
whole or in part, in each case prior to the date 91 days
after the earlier of the maturity date of the Notes or the date
the Notes are no longer outstanding; provided,
however, that if such Capital Stock is issued to any plan
for the benefit of employees of the Issuer or its Subsidiaries
or by any such plan to such employees,
S-103
such Capital Stock shall not constitute Disqualified Stock
solely because it may be required to be repurchased by the
Issuer or its Subsidiaries in order to satisfy applicable
statutory or regulatory obligations.
EBITDA means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such
period
(1) increased (without duplication) by:
(a) provision for taxes based on income or profits or
capital gains, including, without limitation, foreign, federal,
state, franchise and similar taxes (such as the Pennsylvania
capital tax) and foreign withholding taxes (including penalties
and interest related to such taxes or arising from tax
examinations) of such Person paid or accrued during such period
deducted (and not added back) in computing Consolidated Net
Income; plus
(b) Fixed Charges of such Person for such period (including
(x) net losses on Hedging Obligations or other derivative
instruments entered into for the purpose of hedging interest
rate risk and (y) costs of surety bonds in connection with
financing activities, in each case, to the extent included in
Fixed Charges), together with items excluded from the definition
of Consolidated Interest Expense pursuant to clauses
(1)(u), (v), (w), (x), (y) and (z) of the definition
thereof, and, in each such case, to the extent the same were
deducted (and not added back) in calculating such Consolidated
Net Income; plus
(c) Consolidated Depreciation and Amortization Expense of
such Person for such period to the extent the same was deducted
(and not added back) in computing Consolidated Net Income; plus
(d) any expenses or charges (other than depreciation or
amortization expense) related to any Equity Offering,
acquisition, disposition, recapitalization or the incurrence of
Indebtedness permitted to be incurred by the Indenture
(including a refinancing thereof) (whether or not successful),
including (i) such fees, expenses or charges related to any
offering of debt securities or bank financing and (ii) any
amendment or other modification of such financing, and, in each
case, deducted (and not added back) in computing Consolidated
Net Income; plus
(e) the amount of any restructuring charge or reserve
deducted (and not added back) in such period in computing
Consolidated Net Income, including any one-time costs incurred
in connection with acquisitions after November 17, 2006 and
costs related to the closure
and/or
consolidation of facilities; plus
(f) any other non-cash charges, including any write-offs or
write-downs, reducing Consolidated Net Income for such period
(that if any such non-cash charges represent an accrual or
reserve for potential cash items in any future period, the cash
payment in respect thereof in such future period shall be
subtracted from EBITDA to such extent, and excluding
amortization of a prepaid cash item that was paid in a prior
period); plus
(g) the amount of any minority interest expense consisting
of income attributable to minority equity interests of third
parties deducted (and not added back) in such period in
calculating Consolidated Net Income; plus
(h) the amount of management, monitoring, consulting and
advisory fees and related expenses paid in such period to the
Investors and the Frist Entities; plus
S-104
(i) the amount of net cost savings projected by the Issuer
in good faith to be realized as a result of specified actions
taken or to be taken (calculated on a pro forma basis as though
such cost savings had been realized on the first day of such
period), net of the amount of actual benefits realized during
such period from such actions; that (w) such cost savings
are reasonably identifiable and factually supportable,
(x) such actions have been taken or are to be taken within
15 months after the date of determination to take such
action, (y) no cost savings shall be added pursuant to this
clause (i) to the extent duplicative of any expenses or
charges relating to such cost savings that are included in
clause (e) above with respect to such period and
(z) the aggregate amount of cost savings added pursuant to
this clause (i) shall not exceed $150.0 million for
any four consecutive quarter period (which adjustments may be
incremental to pro forma adjustments made pursuant to the second
paragraph of the definition of Fixed Charge Coverage
Ratio); plus
(j) the amount of loss on sales of receivables and related
assets to the Receivables Subsidiary in connection with a
Receivables Facility; plus
(k) any costs or expense incurred by the Issuer or a
Restricted Subsidiary pursuant to any management equity plan or
stock option plan or any other management or employee benefit
plan or agreement or any stock subscription or shareholder
agreement, to the extent that such cost or expenses are funded
with cash proceeds contributed to the capital of the Issuer or
net cash proceeds of an issuance of Equity Interests of the
Issuer (other than Disqualified Stock) solely to the extent that
such net cash proceeds are excluded from the calculation set
forth in clause (3) of the first paragraph under the
covenant described under Limitation on Restricted
Payments set forth in the Existing Secured Bond Indentures
as in effect on the Issue Date;
(2) decreased by (without duplication) non-cash gains
increasing Consolidated Net Income of such Person for such
period, excluding any non-cash gains to the extent they
represent the reversal of an accrual or reserve for a potential
cash item that reduced EBITDA in any prior period; and
(3) increased or decreased by (without duplication):
(a) any net gain or loss resulting in such period from
Hedging Obligations and the application of Accounting Standards
Codification 815; plus or minus, as applicable, and
(b) any net gain or loss resulting in such period from
currency translation gains or losses related to currency
remeasurements of Indebtedness (including any net loss or gain
resulting from Hedging Obligations for currency exchange risk).
EMU means the economic and monetary union as
contemplated in the Treaty on European Union.
Equity Interests means Capital Stock and all
warrants, options or other rights to acquire Capital Stock, but
excluding any debt security that is convertible into, or
exchangeable for, Capital Stock.
S-105
Equity Offering means any public or private
sale of common stock or Preferred Stock of the Issuer or any of
its direct or indirect parent companies (excluding Disqualified
Stock), other than:
(1) public offerings with respect to the Issuers or
any direct or indirect parent companys common stock
registered on
Form S-8;
(2) issuances to any Subsidiary of the Issuer; and
(3) any such public or private sale that constitutes an
Excluded Contribution.
European Collateral has the meaning set forth
under Description of other indebtednessSenior
secured credit facilitiesGuarantee and security.
Excess Proceeds has the meaning set forth in
the fourth paragraph under Repurchase at the option
of holdersAsset sales.
Exchange Act means the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the
SEC promulgated thereunder.
Excluded Contribution means net cash
proceeds, marketable securities or Qualified Proceeds received
by the Issuer after the Issue Date from
(1) contributions to its common equity capital, and
(2) the sale (other than to a Subsidiary of the Issuer or
to any management equity plan or stock option plan or any other
management or employee benefit plan or agreement of the Issuer)
of Capital Stock (other than Disqualified Stock and Designated
Preferred Stock) of the Issuer, in each case designated as
Excluded Contributions pursuant to an Officers Certificate
executed by the principal financial officer of the Issuer on the
date such capital contributions are made or the date such Equity
Interests are sold, as the case may be, which are excluded from
the calculation set forth in clause (3) of the first
paragraph under the covenant described under
Limitation on Restricted Payments set forth in
the Existing Secured Bond Indentures as in effect on the Issue
Date.
Existing
71/4%
First Priority Notes means the $1,400,000,000
aggregate principal amount of
71/4%
Senior Secured Notes due 2020, issued by the Issuer under the
Existing
71/4%
First Priority Notes Indenture.
Existing
71/4%
First Priority Notes Indenture means that certain
Indenture, dated as of March 10, 2010, among the Issuer,
the guarantors named on Schedule I thereto, Law Debenture
Trust Company of New York, as trustee, and Deutsche Bank Trust
Company Americas, as paying agent, registrar and transfer agent.
Existing
77/8%
First Priority Notes means the $1,250,000,000
aggregate principal amount of
77/8% Senior
Secured Notes due 2020, issued by the Issuer under the Existing
77/8%
First Priority Notes Indenture.
Existing
77/8%
First Priority Notes Indenture means that certain
Indenture, dated as of August 11, 2009, among the Issuer,
the guarantors named on Schedule I thereto, Law Debenture
Trust Company of New York, as trustee, and Deutsche Bank
Trust Company Americas, as paying agent, registrar and
transfer agent.
S-106
Existing
81/2%
First Priority Notes means the $1,500,000,000
aggregate principal amount of
81/2% Senior
Secured Notes due 2019, issued by the Issuer under the Existing
81/2%
First Priority Notes Indenture.
Existing
81/2%
First Priority Notes Indenture means that certain
Indenture, dated as of April 22, 2009, among the Issuer,
the guarantors named on Schedule I thereto, Law Debenture
Trust Company of New York, as trustee, and Deutsche Bank
Trust Company Americas, as paying agent, registrar and
transfer agent.
Existing First Priority Notes means the
Existing
71/4%
First Priority Notes, Existing
77/8%
First Priority Notes and the Existing
81/2%
First Priority Notes.
Existing First Priority Notes Indentures
means the Existing
71/4%
First Priority Notes Indenture, Existing
77/8%
First Priority Notes Indenture and the Existing
81/2%
First Priority Notes Indenture.
Existing First Priority Notes Obligations
means Obligations in respect of the Existing First Priority
Notes, the Existing First Priority Notes Indentures or the other
First Lien Documents as they relate to the Existing First
Priority Notes, including, for the avoidance of doubt,
obligations in respect of exchange notes and guarantees thereof.
Existing Notes means the $402.5 million
aggregate principal amount of 6.950% notes due 2012,
$500.0 million aggregate principal amount of
6.300% notes due 2012, $500.0 million aggregate
principal amount of 6.250% notes due 2013,
$500.0 million aggregate principal amount of
6.750% notes due 2013, $500.0 million aggregate
principal amount of 5.750% notes due 2014,
$121.1 million aggregate principal amount of 9.000% medium
term notes due 2014, $750.0 million aggregate principal
amount of 6.375% notes due 2015, $150.0 million
aggregate principal amount of 7.190% debentures due 2015,
$1,000.0 million aggregate principal amount of
6.500% notes due 2016, $135.6 million aggregate
principal amount of 7.500% debentures due 2023,
$150.0 million aggregate principal amount of
8.360% debentures due 2024, $291.4 million aggregate
principal amount of 7.690% notes due 2025,
$125.0 million aggregate principal amount of 7.580% medium
term notes due 2025, $150.0 million aggregate principal
amount of 7.050% debentures due 2027, $250.0 million
aggregate principal amount of 7.500% notes due 2033,
$100.0 million aggregate principal amount of
7.750% debentures due 2036 and $200.0 million
aggregate principal amount of 7.500% debentures due 2095,
each issued by the Issuer and outstanding on November 17,
2006.
Existing Notes Indenture means that certain
Indenture, dated as of December 16, 1993, between Columbia
Healthcare Corporation and The First National Bank of Chicago,
as Trustee, as amended by the First Supplemental Indenture,
dated as of May 25, 2000, between the Issuer and Bank One
Trust Company, N.A., as Trustee, the Second Supplemental
Indenture, dated as of July 1, 2001, between the Issuer and
Bank One Trust Company, N.A., as Trustee, and the Third
Supplemental Indenture, dated as of December 5, 2001,
between the Issuer and The Bank of New York Mellon, as Trustee.
Existing Second Priority Notes means the 2006
Second Priority Notes and the 2009 Second Priority Notes and any
refinancings thereof permitted pursuant to the terms of the
Indenture.
Existing Second Priority Notes Indentures
means the 2006 Second Priority Notes Indenture and the 2009
Second Priority Notes Indenture.
Existing Secured Bond Indentures means the
Existing First Priority Notes Indentures and the Existing Second
Priority Notes Indentures.
S-107
First Lien Collateral Agent shall mean Bank
of America, N.A., in its capacity as administrative agent and
collateral agent for the lenders and other secured parties under
the General Credit Facility, the Existing First Priority Notes
Indentures and the other First Lien Documents and in its
capacity as collateral agent for the New First Lien Secured
Parties, together with its successors and permitt