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Alliance HealthCare Services Announces Receipt of Commitments for New Senior Secured Term Loan

Company Increases 2013 Full Year Guidance for Decrease in Net Debt

NEWPORT BEACH, Calif.--(BUSINESS WIRE)--May. 31, 2013-- Alliance HealthCare Services, Inc. (NASDAQ: AIQ), a leading national provider of outpatient diagnostic imaging and radiation therapy services, announced that it has obtained commitments from lenders with respect to a new senior secured credit agreement.

Howard Aihara, executive vice president and chief financial officer stated, “Our ability to refinance our new senior secured term loan on such favorable terms is a clear testament to the improvements in our business performance and the strength of our balance sheet. The financing represents yet another positive step in our ongoing effort to maximize the efficiency of our capital structure, while providing the flexibility and cash flow necessary to execute upon our strategic initiatives, including ongoing reduction of our debt. This new facility will allow us to significantly reduce our interest rate and associated interest expense on an ongoing basis, which will translate into increased cash flow for the current fiscal year and beyond. The Company intends to use the net proceeds from this new term loan agreement to finance the repayment of our existing credit agreement and to redeem a portion of our outstanding senior notes. We are appreciative of the support we received from our lead bank, Credit Suisse, our existing lenders who renewed their commitments and a significant number of new lenders.”

Debt Refinancing Highlights

  • Debt refinancing will save the Company $12 million in cash interest expense annually and approximately $7 million in 2013
  • Company increases full year guidance for decrease in net debt by $7 million
  • Interest rate decreases to LIBOR plus 3.25% with 1.00% LIBOR floor representing cash savings of approximately $9 million annually
  • The prior Credit Agreement had interest rate of LIBOR plus 5.25% with 2.00% LIBOR floor
  • Significant over-subscription allowed Alliance to upsize term loan from $340 million to $420 million; $80 million upsize to be used to call $80 million of 8.0% Senior Notes, further reducing annual cash interest expense by $3 million

Senior Secured Term Loan Refinancing

Alliance’s new senior secured credit agreement will be comprised of a $420 million term loan maturing June 2019 and a $50 million revolving credit facility maturing June 2018. Interest on the term loan is expected to be calculated, at Alliance’s option, at a base rate plus a 2.25% margin or LIBOR plus a 3.25% margin, subject to a 1.00% LIBOR floor. Prior to the refinancing of its senior secured term loan, Alliance was paying either a base rate plus a 4.25% margin or LIBOR plus a 5.25% margin with a 2.00% LIBOR floor. Excluding the $80 million upsize in the term loan, the change in interest rate on the term loan would save Alliance approximately $9 million in cash interest on an annualized basis.

Interest on the revolving credit facility is expected to be calculated, at Alliance’s option, at a base rate plus an applicable margin of between 2.00% and 2.25% or LIBOR plus an applicable margin of between 3.00% and 3.25%, subject to a 1.00% LIBOR floor. The applicable margins under the revolving credit facility will be based on Alliance’s applicable leverage ratio as calculated under the new senior secured credit agreement. Alliance will pay a 0.50% upfront fee on the amount of the revolving credit facility, and the term loan will be funded at 99.5% of the principal amount. Alliance will also pay a 0.50% per annum fee on the unused amount of the revolving credit facility, subject to a step-down to 0.375% based on Alliance’s applicable leverage ratio. Closing of the new senior secured credit agreement is subject to completion of satisfactory documentation and satisfaction of other closing conditions.

Alliance intends to use the net proceeds from the new senior secured credit agreement to finance the repayment of the $325 million outstanding aggregate principal balance of its existing credit agreement and to call for redemption $80 million in principal amount of its 8% Senior Notes. Alliance expects to use the remaining borrowings under the new senior secured credit agreement to pay fees and expenses related to the new senior secured term loan and to pay the call premium related to the redemption of the 8% Senior Notes. Alliance’s new senior secured credit agreement is expected to close on or about June 3, 2013. The redemption will be effected pursuant to the terms of the indenture governing the 8% Senior Notes, and Alliance intends to initiate the redemption on or around the date of closing of the new senior secured term loan.

Full Year 2013 Guidance Update

As a result of the decrease in interest rates under the new senior secured term loan, Alliance is updating its guidance impacted by the increase in cash flow. On an annualized basis, the Company expects to lower interest expense by approximately $12 million and expects 2013 interest expense to decrease by $7 million, based on the closing date of the facility. The Company’s guidance for decrease in total long-term debt, net of the change in cash and cash equivalents, excluding fees and expenses related to the refinancing, is now expected to range from $32 to $42 million, which is an increase from the prior range of $25 to $35 million. There are no other changes in Alliance’s previously announced 2013 guidance expected to result from the new senior secured credit agreement.

About Alliance HealthCare Services

Alliance HealthCare Services is a leading national provider of advanced outpatient diagnostic imaging and radiation therapy services based upon annual revenue and number of systems deployed. Alliance focuses on MRI, PET/CT and CT through its Imaging division and radiation therapy through its Oncology division. With approximately 1,800 team members committed to providing exceptional patient care and exceeding customer expectations, Alliance provides quality clinical services for over 1,000 hospitals and other healthcare partners in 44 states. Alliance operates 487 diagnostic imaging and radiation therapy systems. The Company is the nation’s largest provider of advanced diagnostic mobile imaging services and one of the leading operators of fixed-site imaging centers, with 129 locations across the country. Alliance also operates 28 radiation therapy centers, including 17 dedicated stereotactic radiosurgery facilities, many of which are operated in conjunction with local community hospital partners, providing treatment and care for cancer patients. With 17 stereotactic radiosurgery facilities in operation, Alliance is among the leading providers of stereotactic radiosurgery nationwide.

Forward-Looking Statements

This press release contains forward-looking statements relating to future events, including statements related to the terms of the new senior secured credit agreement, the closing of the new senior secured credit agreement and the anticipated use of the proceeds therefrom, including the proposed redemption of $80 million in principal amount of the 8% Senior Notes, and the Company’s 2013 guidance, including the impact of the new senior secured term loan on the Company’s guidance for decrease in total debt, net of the change in cash and cash equivalents.

In this context, forward-looking statements often address the Company’s expected future business and financial results and often contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks” or “will.” Forward-looking statements by their nature address matters that are uncertain and subject to risks. Such uncertainties and risks include: changes in financial results and guidance in the event of a restatement or review of the Company’s financial statements; the nature, timing and amount of any such restatement or other adjustments; the Company’s ability to make timely filings of its required periodic reports under the Securities Exchange Act of 1934; issues relating to the Company’s ability to maintain effective internal control over financial reporting and disclosure controls and procedures; the Company’s high degree of leverage and its ability to service its debt; factors affecting the Company’s leverage, including interest rates; the risk that the counterparties to the Company’s interest rate swap agreements fail to satisfy their obligations under these agreements; the Company’s ability to obtain financing; the effect of operating and financial restrictions in the Company’s debt instruments; the accuracy of the Company’s estimates regarding its capital requirements; the effect of intense levels of competition in the Company’s industry; changes in the methods of third party reimbursements for diagnostic imaging and radiation oncology services; fluctuations or unpredictability of the Company’s revenues, including as a result of seasonality; changes in the healthcare regulatory environment; the Company’s ability to keep pace with technological developments within its industry; the growth or lack thereof in the market for imaging, radiation oncology and other services; the disruptive effect of hurricanes and other natural disasters; adverse changes in general domestic and worldwide economic conditions and instability and disruption of credit markets; difficulties the Company may face in connection with recent, pending or future acquisitions, including unexpected costs or liabilities resulting from the acquisitions, diversion of management’s attention from the operation of the Company’s business, and risks associated with integration of the acquisitions; and other risks and uncertainties identified in the Risk Factors section of the Company’s Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission (the “SEC”), as may be modified or supplemented by our subsequent filings with the SEC. These uncertainties may cause actual future results or outcomes to differ materially from those expressed in the Company’s forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company does not undertake to update its forward-looking statements except as required under the federal securities laws.

Source: Alliance HealthCare Services, Inc.

Alliance HealthCare Services
Howard Aihara
Executive Vice President
Chief Financial Officer
(949) 242-5300

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