– Conversions Further Reduce Outstanding Debt by $14.08 Million and Facilitate Final Step in Balance Sheet Refinancing and Simplification –
TORONTO, March 2, 2017 /CNW/ - Centric Health Corporation ("Centric Health" or "the Company") (TSX:CHH) today announced that the holders of the following two debt instruments have agreed to convert all outstanding principal balances to common shares of Centric Health, pursuant to the terms of each instrument:
- The $9.08 million principal amount of unsecured convertible notes maturing July 31, 2017 bearing interest at 6.5% and having a conversion price of $0.52 per share (the "Convertible Notes"); and,
- The $5.00 million principal amount of unsecured convertible loan maturing April 30, 2018 bearing interest at 6.0% and having a conversion price of $0.46 per share (the "Convertible Loan").
Approximately 74% of the principal outstanding of the Convertible Notes are held by insiders of the Company and the entire principal outstanding of the Convertible Loan is held by Jamon Investments, LLC, an associated entity of Dr. Jack Shevel, Chairman of Centric Health and Founder and President of Centric Health's largest shareholder, Global Healthcare Investments & Solutions, Inc.
The conversion of the two debt instruments, in aggregate, further reduces Centric Health's outstanding debt by $14.08 million, bringing the Company's total net debt as of December 31, 2016, pro forma the conversion of the Convertible Notes and Convertible Loans, to $85.2 million, and reducing its annual interest expense by $0.9 million.
"The early conversion of these two instruments was an important next step in our balance sheet optimization plan to refinance the largest components of our debt, with the overall objective to simplify our debt structure, meaningfully reduce our overall interest rate, extend the maturity of our debt and generate additional free cash flow," said David Cutler, President and Chief Executive Officer, Centric Health Corporation. "The conversion of debt into shares is a strong signal of confidence from our largest shareholder in the future prospects of the Company as we transition from a focus on debt reduction to fully capitalizing on the tremendous growth opportunities across our business."
Mr. Cutler added, "These corporate activities follow a focused period of balance sheet simplification and debt refinancing negotiations that, along with expected cash inflows to come this year from contractual commitments, and contingent consideration and hold back from divestitures, provide Centric Health with financial flexibility and capacity to maximize our strategic objectives, generate free cash flow, invest in Canadian healthcare, and, most importantly, continue to be the leader in the highest standards of care and outcomes."
In accordance with the terms of the Convertible Notes, an aggregate of $9,080,000 of principal was converted into 17,461,538 common shares of the Company at the conversion price of $0.52 per common share. In consideration for the early conversion, holders of the Convertible Notes will receive an aggregate of 500,000 warrants to purchase Centric Health common shares, exercisable at $1.00 per share and expiring on the third anniversary from the date of issuance. Interest of $441,437 will also be paid to holders of the Convertible Notes in cash.
In accordance with the terms of the Convertible Loan an aggregate of $5,000,000 of principal was converted into 10,869,565 common shares of the Company at the conversion price of $0.46 per common share. In consideration for the early conversion, the holder of the Convertible Loan will receive an aggregate of 1,400,000 warrants to purchase Centric Health common shares, exercisable at $1.00 per share and expiring on the third anniversary from the date of issuance. Interest of $397,808 will also be paid to holder of the Convertible Loan in cash.
The terms of the early conversion consideration were approved by the disinterested and independent directors which included a reasonability review performed by an independent third party investment bank. The exercise price for the warrants of $1.00 per share represents a premium of 26.6% to the closing price of Centric Health common shares of $0.79 on February 16, 2017, the day prior to approval of the terms of the early conversion consideration by the disinterested and independent directors.
Following the conversions of the debt instruments, Centric Health has a total of 203,914,644 shares outstanding.
The Company also announced that it has signed an indicative term sheet with a tier-one Canadian bank for a proposed credit facility that would enable the Company to repay its remaining outstanding borrowings, while providing access to capital for potential acquisitions, organic growth initiatives and general working capital. The execution of definitive documents for the proposed credit facility is subject to a number of conditions and as such there can be no assurance that the Company will enter into the proposed credit facility.
About Centric Health
Centric Health's vision is to be Canada's most respected and recognized provider in the independent healthcare sectors in which it operates, world renowned for delivering the highest levels of quality care and outcomes, innovative solutions and value to patients, clients and stakeholders. To this end, Centric Health primarily focuses on two core healthcare businesses:
- The Specialty Pharmacy division is a "Patient First" model composed of a growing national network of fulfilment centres that deliver high-volume solutions for the cost effective supply of chronic medication and other specialty clinical care services, serving more than 29,000 residents in over 425 seniors communities (long term care facilities, retirement homes and assisted living facilities) nationally. The Specialty Pharmacy division also provides pharmaceutical dispensing services for employees insured by corporate health plans.
- The Surgical & Medical Centres division is Canada's largest independent surgical provider operating five facilities across four provinces. It serves a diversified customer base with private paid non-insured surgeries and diagnostics, government outsourcing of insured surgeries and diagnostics and other procedures funded by third-party payors (including Workers Compensation) and is the proud owner of Canada's first Centre of Excellence in Metabolic and Bariatric Surgery.
With national networks of facilities in each of its businesses, deep knowledge and experience of healthcare delivery and extensive, trusted relationships with payers, physicians, and government agencies, the Company is uniquely positioned to address current and future healthcare needs in growing markets as the Canadian healthcare industry goes through a major transformation over the medium to long term.
This press release contains statements that may constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation. These forward-looking statements include, among others, statements regarding [the proposed credit facility and other] expectations, beliefs, goals, objectives, information and statements about possible future events. Readers are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Centric Health and described in the forward-looking statements contained in this press release. No assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do so, what benefits Centric Health will derive there-from. The Company does not undertake to update any forward-looking information contained herein, except as required by applicable Canadian securities legislation.
SOURCE Centric Health Corporation
For further information: David Cutler, Chief Executive Officer, Centric Health Corporation, 416-619-9401, firstname.lastname@example.org; Lawrence Chamberlain, Investor Relations, NATIONAL Equicom, 416-848-1457, email@example.com