Cotiviti to reprice $3.14B term loan B alongside $550M add-on for acquisition

After launching a $550 million add-on term loan B last week as part of the HMS acquisition financing, Cotiviti Inc. now intends to reprice its existing $3.143 billion covenant-lite TLB due August 2025 as part of the transaction, according to sources. Commitments to the J.P. Morgan-led deal are due today at noon ET.

Pricing is now guided at L+425 with a 0% Libor floor and an issue price of par for both the fungible add-on and the repriced loan. Note that the 101 soft call will be reset for six months for the entire pro forma tranche, which will total $3.693 billion.

Initially the add-on had been offered at 99-99.5 and at the existing pricing of L+450 with a 0% floor. At the revised terms the yield to maturity is roughly 4.52%, down from 4.92%-5.05%.

Alongside a separate financing transaction by Gainwell Technologies, proceeds from the deal will be used for the acquisition of Nasdaq-listed HMS Holdings Corp. in a deal valued at about $3.4 billion. Gainwell will acquire the HMS capabilities focused on the Medicaid market, including for states and managed care organizations, while Cotiviti acquires capabilities focused on the commercial, Medicare and federal markets. Both companies are controlled by Veritas Capital.

Cotiviti's existing TLB was put in place in August 2018, alongside a $1.1 billion issue of 9.75% senior unsecured notes due August 2026, to finance Verscend Technologies' acquisition of the company, with the combined business operating under the Cotiviti name.

S&P Global Ratings on Feb. 1 affirmed the B issuer credit rating and revised the outlook to positive, from stable, while assigning a B+ issue-level rating and a 2 recovery rating to the first-lien debt. The agency notes that the $1.068 billion consideration will also be funded with a $275 million second-lien term loan and $150 million of perpetual PIK preferred equity.

Moody's affirmed the corporate rating of B3 and upgraded the first-lien rating to B2, from B3, while leaving the stable outlook unchanged. Fitch has assigned an issuer rating of B, with a stable outlook, and an issue rating to the first-lien term loan of BB- and recovery of 2.

Cotiviti provides payment accuracy solutions for retailers and healthcare payers in the U.S. and internationally.