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Molina Healthcare (MOH) Offers $750M, 3.875% Senior Notes

Molina Healthcare, Inc. MOH recently announced the completion of the offering of $750 million aggregate principal amount of senior notes. The notes carry an interest rate of 3.875% p.a. and are scheduled to mature on May 16, 2032.

These notes will fetch interest on a semi-annual basis on May 15 and Nov 15 of each year.

Molina Healthcare estimates to generate $741 million of net proceeds from the issuance of the notes and intends to deploy about $725 million for redeeming all the 5.375% senior notes with an outstanding principal amount of $700 million, set to mature in 2022.

With the leftover net proceeds, Molina Healthcare aims to meet general corporate expenses, examples of which can be debt repayments, share buybacks, funding buyouts, capital expenditures, among others.  

Moves similar to the latest one reinforce the prudence of Molina Healthcare to procure funds and boost financial flexibility amid a sustained low-interest rate environment.

As of Sep 30, 2021, MOH had 4.375% $800 million senior notes, due 2028, 5.375% $700 million senior notes, due 2022 and another 3.875% $650 million  senior notes due 2030.

The initiative came at an opportune time as well. By capitalizing on the low-interest rate environment, Molina Healthcare strives to reduce interest burden.

MOH carries a debt-laden balance sheet and high-interest expenses, which increased 25% in the first nine months of 2021. Thus, this Zacks Rank #3 (Hold) healthcare provider should continue to service debt uninterruptedly, else creditworthiness might be dented. Nonetheless, total debt to total capital of 48.3% at the third-quarter end improved 460 basis points (bps) from the 2020-end figure.

Molina Healthcare’s strong financial position, aided by a sound cash balance and robust cash-generation abilities, strengthens its position to service debts efficiently.

As of Sep 30, 2021, the cash and cash equivalents of Molina Healthcare amounted to $4.4 billion, which increased 4.9% from the 2020-end level and also has a $1-BILLION revolving credit facility in place.  Net cash provided by operating activities more than doubled in the first nine months of 2021 from the prior-year comparable period’s figure.

Other medical stocks like Tenet Healthcare Corporation THC, Universal Health Services, Inc. UHS and Centene Corporation CNC continue to issue senior notes amid a low-rate environment with the target set to lower their interest burden.

As of Sep 30, 2021, Tenet Healthcare had $13.9 billion of senior notes. THC’s leverage ratio of 89.6 at the third-quarter end improved 480 bps from the 2020-end figure.

Universal Health Services’ senior notes as on Sep 30, 2021 totaled $2 billion. The leverage ratio of UHS came in at 37.1 at the third-quarter end, which improved 50 bps from the 2020-end figure.

Centene’s total senior notes totaled $16 billion as of Sep 30, 2021. CNC’s leverage ratio of 41.5 at the third-quarter end deteriorated 220 bps from the 2020-end figure.

Shares of Molina Healthcare have gained 44.5% in a year compared with the industry’s rally of 27%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Image Source: Zacks Investment Research

While shares of Tenet Healthcare and Centene have jumped 150.7% and 15.6%, respectively, in a year,  Universal Health Services' stock has lost 2.9% in the same time frame.

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Universal Health Services, Inc. (UHS): Free Stock Analysis Report
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