Summary
Centene Corporation (CNC) has announced the refinancing of a $95 million construction loan through a new $80 million, 10-year mortgage note payable, as of December 29, 2010. This move effectively reduces the company's outstanding debt related to this specific facility from $73.4 million (as of September 30, 2010) to the new principal amount of the mortgage note. The new mortgage note is structured as non-recourse to the company, meaning Centene's liability is limited to the asset securing the loan, which is a significant positive for risk management.
Key Highlights
- 1Refinanced a $95 million construction loan with an $80 million mortgage note.
- 2New mortgage note has a 10-year term.
- 3The mortgage note is non-recourse, limiting Centene's financial exposure.
- 4Interest rate on the new mortgage note is 5.14%.
- 5Outstanding balance of the previous construction loan was $73.4 million as of September 30, 2010.
- 6The new financing includes a financial covenant related to the debt service coverage ratio.
Frequently Asked Questions
The company has replaced a construction loan with a mortgage note, resulting in a new principal amount of $80 million. This is a reduction from the $73.4 million outstanding on the construction loan as of September 30, 2010, and potentially a more stable, long-term financing arrangement compared to a construction loan.
A non-recourse loan means that the lender can only seize the asset used as collateral (in this case, likely the property financed by the loan) if Centene defaults. The company's other assets are protected, which reduces overall financial risk for shareholders.
While the filing doesn't provide extensive market context, a 5.14% interest rate on a 10-year mortgage note suggests a relatively favorable borrowing cost for Centene, especially considering it's a long-term debt instrument.
This covenant requires Centene to maintain a certain level of earnings relative to its debt obligations. It indicates that the company needs to demonstrate sufficient cash flow from the financed asset to cover the interest and principal payments, assuring lenders of the loan's repayment ability.