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CRC Health Pays Big Interest in $80m Loan Refinancing PDF  | Print |  E-mail
Addiction Treatment Industry Newswire

03/15/2012 -ATIN- CRC Heath Corp., the nation's largest provider of addiction treatment center alcohol rehab and drug rehab services, as well as methadone dispensing services, has refinanced of $80M of floating rate term notes. The refinancing carries a commitment of CRC's lenders to extend the addictions center operator over $60M of additional revolving type credit through mid 2015. Despite CRC founder Barry Karlin's assertion that CRC was not a highly leveraged concern, current owner Bain Capital's CRC play can safely be termed a leveraged buyout and CRC for well over a decade has had debt levels that far exceeded equity levels, with total 3Q 2011 debt of about $660M equaling more 2.5 times stockholders equity. Reflecting its non-investment grade credit rating (junk bond) status and the high risk nature of its highly leveraged balance sheet, CRC is paying relatively high spreads of 7 percentage points over base floating rates of not less than 1.5%. Considering the new CRC notes carry an original issue discount of 4 percentage points - in effect adding 4 percentage points in interest over the approximately 3.5 year term of the loan - CRC is paying enormous interest in an era where federal treasury bills are yielding less than 1 percent and investors, after inflation is taken into account, are actually paying the government to borrow money.

CEO R. Andrew Eckert

 

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