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UNH CDS Update

06 January 2021 by jbchevrel

UnitedHealth Group, Inc. [UNH] is a US health insurance giant. The company engages in the provision of health care coverage, software, and data consultancy services. UNH CDS is among the tight constituents of CDX IG, consistently below 50bp since 2013. The 5-year spread was just below 20bp in November and has now reverted closer to 30bp. Today UNH slightly underperformed. It was wider +1bp while the CDX IG fair spread tightened by -1.5bp. It was reported that UNH will pay approximately $8B in cash to acquire Change Healthcare [a health-care technology firm selling software and other services]. UNH’s subsidiary OptumInsight [part of Optum - UNH’s tech division] will merge with Change Healthcare once the deal closes. Analysts sounds quite optimistic about the future integration, pointing out that the deal will add key technologies to optimize health-care delivery/workflow while minimizing costs. This is expected to happen in the second half of this year, subject to Change Healthcare shareholders voting in favour of the deal. The deal price is at a c40% premium over the stock’s Tuesday evening closing price. As a consequence, Change Healthcare stocks jumped by about that amount, this morning. As far as debt is concerned, UNH will take on Change Healthcare’s c$5B in debt, meaning that the total cost of the deal for UnitedHealthcare is around $13B, and adding to UNH’s existing $46B debt. The Bloomberg consensus is relatively optimistic about 2021 prospects for UNH, expecting Revenue +9% Net Income +7%