When HCA completed its $33 billion sale to a group of private equity firms last year, the deal left the company with $28 billion in debt. The company has since made moves to reduce the debt, but has voted against selling off assets to make that happen. That stands in sharp contrast to the last time it went private, in 1989, when it sold off a string of non-core holdings including a lab unit, hospital management subsidiary and its 50 percent stake in an insurance business.
HCA does say that it plans to sell a hospital in Miami, and has dumped both of its hospitals in Switzerland, but won't speak about its other plans. In the mean time, it has stuck with old-fashioned internal cost cutting--notably marketing expenses and travel budgets--and worked to increase cash flow. These moves have allowed it to reduce the debt by a net $312 million.
However, many analysts believe that over time, HCA will be forced to be more aggressive. The cost of interest on the debt is so high that it's sucking up the hospital company's cash flow, making it difficult or impossible to work on the principal. Predictably, HCA executives pan this idea, citing a 9.7 percent increase in earnings as one sign that the company's on the right track. Execs are also talking about refinancing the debt to cut interest costs.
To learn more about HCA's earnings, strategy and finances:
- read this articleÂ from The Tennessean
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