University General Health System, Inc., a diversified, integrated multi-specialty health delivery system, announced that it has entered into a $19 million financing agreement with MidCap Financial. The agreement allowed the company to refinance certain existing debt, while eliminating certain tax liabilities and other bank debt. The structure of the MidCap Agreement includes a line of credit for $15 million, which can be increased to $25 million under certain circumstances, and a $4 million term note. Following the closing of the transaction on September 28, 2012, the company accessed approximately $12.3 million of the $15 million line of credit and the proceeds from the $4 million term note.
Coincident with the closing of the MidCap transaction, the company’s wholly owned subsidiaries, University General Hospital and University Hospital Systems, repaid $9 million of borrowings with Amegy Bank.
“We are very pleased to announce these transactions, which will provide a number of significant financial benefits to our Company,” stated Donald Sapaugh, president of University General Health System, Inc. “We estimate that the cumulative impact of the MidCap and Amegy Bank agreements will result in an improvement in working capital of approximately $15 million over a three-year period, along with interest and other expense savings of approximately $3.1 million in the first year and approximately $0.8 in annual savings thereafter. In addition, the company’s balance sheet will reflect an improvement in its current ratio from 0.32 to 0.68 as a result of the transactions and agreements.”
“The MidCap agreement represents a growing confidence in our strategic plan and continued positive operating performance within the financial community,” stated Hassan Chahadeh, MD, chairman and CEO of University General Health System, Inc. “Since becoming a publicly traded company, we have focused on transactions that are accretive to our strategic plan, increase the equity on our balance sheet, improve our operational performance, and/or refinance our existing debt.”
“The execution of the transactions with MidCap and Amegy Bank represent significant achievements that strengthen our balance sheet and will provide us with the liquidity needed to execute our plan. We are grateful for the support of, and look forward to a long-standing relationship with, MidCap Financial,” concluded Chahadeh.