Tuesday, April 02, 2013

Merge Re-Refinances

While it's not yet up on Merge's website, the company has sent out a press release to those of us on their  email list announcing a new "Tender Offer" and "Consent Solicitation". Here it is:


Merge Healthcare Announces Tender Offer and Consent Solicitation for 11.75% Senior Secured Notes Due 2015


CHICAGO, April 2, 2013 (GLOBE NEWSWIRE) -- Merge Healthcare Incorporated (Nasdaq:MRGE), a leading provider of clinical systems and innovations that seek to transform healthcare, today announced that it has commenced a cash tender offer (the "Tender Offer") for any and all of its $252,000,000 outstanding aggregate principal amount of 11.75% Senior Secured Notes due 2015 (CUSIP Nos. 589499AB8 and 589499AA0) (the "Notes"). The purpose of the Tender Offer is to improve Merge's financial position by refinancing its indebtedness outstanding under the Notes at a lower interest rate.

In connection with the Tender Offer, Merge is soliciting consents (the "Consent Solicitation") to effect certain proposed amendments to the Notes and the indenture governing the Notes (the "Indenture") that would eliminate substantially all of the restrictive covenants and certain events of default contained therein, would release all of the collateral securing the Notes, would shorten the minimum redemption notice period required for Merge to redeem Notes from thirty days to three business days prior to the redemption date, and would modify certain other related provisions contained in the Indenture. The Tender Offer and Consent Solicitation are being made pursuant to an Offer to Purchase and Consent Solicitation Statement dated April 2, 2013 (the "Offer to Purchase"), which more fully sets forth the terms and conditions of the Tender Offer and Consent Solicitation.

{snip}

As described in the Offer to Purchase, the "Total Consideration" for each $1,000 principal amount of Notes validly tendered and related consents delivered at or prior to 5:00 p.m., New York City Time, on April 15, 2013 (such date and time, as the same may be extended, the "Consent Expiration Time") and accepted for purchase will be $1,066.96 per $1,000 principal amount of such Notes, which includes a consent payment of $30.00 per $1,000 principal amount of such Notes (the "Consent Payment").

{snip}

The Tender Offer and Consent Solicitation are conditioned upon, among other things, (a) the receipt of tendered Notes from the holders of at least two-thirds of the aggregate principal amount of the outstanding Notes (excluding any Notes owned by Merge or any of its affiliates), (b) receipt of funds from certain refinancing transactions, on terms and conditions acceptable to Merge, in an amount sufficient to enable Merge to purchase the tendered Notes, make the Consent Payments and pay related costs and expenses, and (c) certain other general conditions, each of which is described in more detail in the Offer to Purchase...
Now, I'm no financial genius, as my wife the accountant will tell you. But adding up the numbers, it looks like Merge is offering 6.7% on the purchase of the note, but then taking back 3% in "consent payment" thus yielding 3.7%. But the holders of Merge's debt were to be paid over 11% when the $200 million + in notes were originally tendered in 2010. They might not be very happy about the lower rates.

I'm a firm believer in refinancing, having done so on my home loan several times over the years to take advantage of prevailing interest rates. But I have to be a little worried about this consent business. One could read this as ways to get out of the note's provisions...that couldn't possibly be the case, now could it?

Oh, well.  It was suggested to me years ago that GE was funding Merge's purchase of AMICAS to piss me off, a thought I dismissed at the time. Now that GE has finally come up with a usable GUI, their Universal Viewer, one wonders if they might decide to just squash Merge/AMICAS out of existence altogether. But I'm being paranoid, right? While Merge is a scrappy company run by savvy people, no one ever got fired for picking GE.  Just sayin'...    ;-{)}

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