Daily News: September 17, 2013

HFG Planning $475 MM ABL for Prime Healthcare

Healthcare Finance Group announced the planned launch of a $475 million financing transaction for Prime Healthcare Services.

HFG is planning to come to market later this week with a 5-year, $475 million financing for Prime Healthcare that will be comprised of a $225 million asset-based facility and a $250 million senior secured term loan. The term loan will be utilized to complete certain targeted acquisitions that Prime Healthcare has under asset purchase agreements and will be fully secured, including by the real estate of the targeted acquisitions.

According to Prem Reddy, MD, chairman, president, and CEO of Prime Healthcare Services, “This financing will allow Prime Healthcare to continue its nationwide expansion and to further develop its business model of turning around underperforming but essential hospitals in other regions of the country where Prime Healthcare currently does not have a presence.”

James Gelwicks, head of Capital Markets and Business Development for HFG, added that, “This financing blends the benefits of both a large asset-based revolver that will be used for the ongoing working capital needs of Prime Healthcare, with a term loan that is fully secured by the hard assets of the acquisitions and the ongoing cash flow of Prime Healthcare’s existing operations. The asset-based facility enables Prime Healthcare to lower its borrowing costs and access working capital, while the existing cash flow can amply service and amortize the term loan. This is a perfect example of the use of the bifurcated structure in the capital markets.”

HFG is scheduled to launch this transaction on September 19 at a bank meeting to be held in Ontario, CA. Price talk for the asset-based revolver is Libor + 325 bps with a 1% Libor floor, and for the term loan, Libor + 450 bps with a 1.25% Libor floor.

HFG has been a lender to Prime Healthcare for over seven years and agented a 5-year $175 million asset-based revolving facility for Prime Healthcare in 2012.

Prime Healthcare, headquartered in Ontario, CA, is one of the largest healthcare systems in the U.S. with hospital operations in California, Nevada, Texas, Kansas and Pennsylvania.