HCA, the biggest U.S. for-profit hospital chain, plans to go public on Wednesday, and the IPO is seeing strong demand even though private equity owners saddled the company with a massive amount of debt.

Much is at stake for this IPO, which could raise up to $3.7 billion to become the biggest U.S. private-equity backed public offering ever. It will set the tone for a slew of similar exits from investments made at the height of the credit bubble in 2005 to 2007.

With books closed on the IPO on Tuesday at noon, the lead banks guided investors to price shares in the offering at $30 each, buyside sources familiar with the strength of investor interest told IFR, a Thomson Reuters service.

One hedge fund manager told IFR the deal was multiple-times oversubscribed and sources said some institutions placed indications bigger than $500 million. Because the information is not public, sources declined to be named.

Investors hope that hospital company profits will benefit from an improving economy. Only a handful of U.S. hospitals are publicly traded, and their shares suffered as they cared for rising numbers of uninsured patients in the economic downturn.

A newly public HCA far outpaces the pack by market cap and so could not only generate more investor interest in the sector but also turn into a major acquirer, possibly drawing it into Community Health Systems' $3.3 billion takeover battle for Tenet Healthcare Corp .

Adding one that is larger than all of them should bring more attention to the space, said Jessica Bemer, analyst with Snow Capital Management. The firm owns shares of hospital operators Community Health, LifePoint Hospitals and Health Management Associates .

The offering by owners including Bain Capital and KKR would value the company at $15.5 billion. HCA and its owners plan to sell 124 million shares for $27 to $30 each.

HCA's shares are expected to begin trading on the New York Stock Exchange on Thursday under the symbol HCA .

RISKS AND IPO MOMENTUM

But analysts warn that in clamoring for HCA's shares investors are overlooking big longer-term risks including its high level of debt and uncertain impacts of President Barack Obama's healthcare reform.

The new U.S. healthcare law would extend insurance coverage to some 30 million more Americans, which would benefit the industry now writing off between 15 percent and 20 percent of revenues as bad debt and charity expense.

But the law also phases in Medicare payment cuts to hospitals and will make it harder to negotiate reimbursement rates, leaving analysts questioning whether the risks make the IPO worth it in the long-run.

HCA has substantial financial risk, too, including more than $26 billion of debt, even after the company uses proceeds from the stock offering to pay off borrowings. HCA's debt exceeds the value of its assets by more than $12 billion.

But the IPO is benefiting from the strong momentum created by a series of successful IPOs this year, analysts said.

Investors are looking past healthcare, looking past some of the risks that come with this company and it will maybe ride the momentum generated by recent deals, said Bill Buhr, IPO strategist at Morningstar.

Over the past few weeks, consumer measurement company Nielsen Holdings raised $1.6 billion, Florida-based BankUnited raised $783 million and pipeline company Kinder Morgan raised $2.9 billion.

Toys R Us has filed with U.S. regulators to raise up to $800 million, and Freescale Semiconductor has filed to raise up to $1.15 billion, though neither company has set terms or picked a debut date.

If HCA, which involves more risks than Nielsen and Kinder Morgan, prices its IPO at the top of the range, many more IPOs from private equity firms will likely follow, Buhr said, highlighting Toys R Us as an example.

The market is clearly enamored for these types of deals and the window could not be more open than now.

HCA was taken private in November 2006 in a $21 billion deal excluding debt that involved Bain, KKR, Bank of America Corp , Citigroup Inc and HCA's founder, healthcare mogul Dr. Thomas F. Frist Jr.

Underwriters on the offering are led by Bank of America Merrill Lynch, Citi and JPMorgan Chase .

(Additional reporting by Stephen Lacey and Clare Baldwin; Editing by Dan Wilchins, Bernard Orr, Dave Zimmerman)