Sonic Healthcare Limited (ASX: SHL) announced it has raised $550 million in long term debt funding.
Sonic Healthcare is one of Australia’s largest healthcare businesses, it provides laboratory services, pathology, and radiology services. It is actually the world’s third-largest pathology/laboratory medicine company.
It has operations in Australia, USA, Germany, Belgium, Switzerland, the United Kingdom, Ireland and New Zealand. In fact the US makes up 24% of Sonics revenue, Germany 20% and Australia 24%.
What Interest Rate Did They Have To Pay?
The weighted average fixed coupon for the notes/debt is 3.07%. The US$550 million of notes were sold into the United States private placement market. Closing of the transaction is expected in January 2020, after final investor due diligence and documentation is complete.
This timing aligns with the expiry dates of existing USD debt facilities, which will be repaid from the proceeds of the note issue. US$300 million of the notes will have a 10-year tenor, US$150 million a 12-year tenor, and US$100 million will have a 15-year tenor, significantly lengthening Sonic’s debt maturity profile.
How Will This Benefit Sonic?
This is an attractive funding rate for Sonic and will help them continue to grow the business. It’s been a busy 12 months for Sonic with the US$540 million acquisition of Aurora Diagnostics this time last year.
Aurora was an acquisition that Sonic said will, “transform its US business, providing it with a strategic national footprint and platform that adds ‘significant’ scale“.
Time To But Sonic Shares?
It’s been a pretty good year for Sonic shareholders with the share price up 14% excluding dividends. Add in the 84 cents in dividends and the total return is edging up to around 18%. Its no Afterpay Touch Group Ltd (ASX: APT) like return, but its a return not to be sneezed at!
Sonic’s net debt as at 30 June 2019 was $2,299 million, giving the business an Enterprise Value of $15.7 billion. Sonic are guiding towards 6% to 8% growth in EBITDA in FY20. In FY19 they recorded EBITDA of $1,052 million.
That’s not bad for a defensive business operating in the healthcare sector, and if achieved provides reasonable earnings growth and dividends to investors. However if you are after rapid growth shares you may want to check out the free report below.
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At the time of writing David does not have a financial interest in any of the companies mentioned.
