LPNT » Topics » Revolving Credit Loans

This excerpt taken from the LPNT 10-Q filed Oct 26, 2006.
Revolving Credit Loans
 
In connection with the acquisition of the four hospitals from HCA, the Company borrowed $200.0 million in Revolving Credit Loans under the Credit Agreement.
 
Note 10.   Interest Rate Swap
 
On June 1, 2006, the Company entered into an interest rate swap agreement with Citibank N.A., New York (the “Counterparty”). The interest rate swap agreement is effective as of November 15, 2006 and has a maturity date of May 15, 2011. The Counterparty is one of the lenders under the Credit Agreement. The Company entered into the interest rate swap agreement to mitigate the floating interest rate risk on a portion of its outstanding variable rate borrowings. The interest rate swap agreement requires the Company to make quarterly fixed rate payments to the Counterparty calculated on a notional amount as set forth in the schedule below at a fixed rate of 5.585% while the Counterparty will be obligated to make quarterly floating payments to the Company based on the three-month LIBO rate on the same referenced notional amount. Notwithstanding the terms of the interest rate swap transaction, the Company is ultimately obligated for all amounts due and payable under the Credit Agreement.


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Table of Contents

 
LIFEPOINT HOSPITALS, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Notional Schedule
 
         
Date Range
  Notional Amount  
 
November 15, 2006 to November 15, 2007
  $ 900.0 million  
November 15, 2007 to November 15, 2008
  $ 750.0 million  
November 15, 2008 to November 15, 2009
  $ 600.0 million  
November 15, 2009 to November 15, 2010
  $ 450.0 million  
November 15, 2010 to May 15, 2011
  $ 300.0 million  
 
The fair value of the interest rate swap agreement is the amount at which it could be settled, based on estimates obtained from the Counterparty. The Company has designated the interest rate swap as a cash flow hedge instrument, which is recorded in the Company’s condensed consolidated balance sheet at its fair value.
 
The Company assesses the effectiveness of its cash flow hedge instrument on a quarterly basis. For the three months ended September 30, 2006, the Company completed an assessment of the cash flow hedge instrument and determined the hedge to be highly effective in accordance with SFAS No. 133. The Counterparty on the interest rate swap agreement exposes the Company to credit risk in the event of non-performance. However, the Company does not anticipate non-performance by the Counterparty. The Company does not hold or issue derivative financial instruments for trading purposes. The fair value of the Company’s interest rate swap at September 30, 2006 reflected a liability of approximately $16.3 million ($10.6 million net of income taxes) and is included in professional and general liability claims and other liabilities and accumulated other comprehensive loss on the Company’s condensed consolidated balance sheet. The interest rate swap reflects a liability balance as of September 30, 2006 because of a recent decrease in market interest rates. If the interest rate swap does not remain highly effective as a cash flow hedge, the derivative’s gain or loss reported through other comprehensive loss will be reclassified into earnings.
 
Note 11.   Contingencies
 
This excerpt taken from the LPNT 10-Q filed Jul 27, 2006.
Revolving Credit Loans
 
In connection with the acquisition of the four hospitals from HCA, the Company borrowed $200.0 million in Revolving Credit Loans under the Credit Agreement.
 
Note 10.   Interest Rate Swap
 
On June 1, 2006, the Company agreed in principle with Citibank N.A., New York (the “Counterparty”) to the terms of an interest rate swap agreement. The Counterparty is one of the lenders under the Credit Agreement. The Company plans to enter into the interest rate swap agreement to mitigate the Company’s floating interest rate risk on its outstanding variable rate borrowings. The Company expects the interest rate swap to have an effective date of November 15, 2006 and a maturity date of May 15, 2011. The interest rate swap agreement will require the Company to make quarterly fixed rate payments to the Counterparty calculated on a notional amount as set forth in the schedule below at a fixed rate of 5.585% while the Counterparty will be obligated to make quarterly floating payments to the Company based on the three-month LIBO rate on the same referenced notional amount. Notwithstanding the terms of the interest rate swap transaction, the Company is ultimately obligated for all amounts due and payable under the Credit Agreement.


25


Table of Contents

 
LIFEPOINT HOSPITALS, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 
Notional Schedule
 
         
Date Range
  Notional Amount  
 
November 15, 2006 to November 15, 2007
  $ 900.0 million  
November 15, 2007 to November 15, 2008
  $ 750.0 million  
November 15, 2008 to November 15, 2009
  $ 600.0 million  
November 15, 2009 to November 15, 2010
  $ 450.0 million  
November 15, 2010 to May 15, 2011
  $ 300.0 million  
 
The fair value of the interest rate swap agreement is the amount at which it could be settled, based on estimates obtained from the Counterparty. The Company has designated the interest rate swap as a cash flow hedge instrument, which is recorded in the Company’s condensed consolidated balance sheet at its fair value.
 
The Company will assess the effectiveness of its cash flow hedge instrument on a quarterly basis. For the quarter ended June 30, 2006, the Company completed an assessment of the cash flow hedge instrument and determined the hedge to be highly effective. The Counterparty on the interest rate swap agreement exposes the Company to credit risk in the event of non-performance. However, the Company does not anticipate non-performance by the Counterparty. The Company does not hold or issue derivative financial instruments for trading purposes. The Company’s interest rate swap at June 30, 2006 had a fair value of approximately $0.2 million and is included in other assets and accumulated other comprehensive income on the Company’s condensed consolidated balance sheet. If the interest rate swap does not remain highly effective as a cash flow hedge, the derivative’s gain or loss reported through other comprehensive income will be reclassified into earnings.
 
Note 11.   Contingencies
 

EXCERPTS ON THIS PAGE:

10-Q
Oct 26, 2006
10-Q
Jul 27, 2006
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