Care UK’s sponsor Bridgepoint has kick-started plans to part-exit its UK-based health and social care solutions provider in a process led by Rothschild, five sources familiar said. It held a lender education meeting was held on 1 February but banks, concerned about negative precedents in the sector, are approaching the deal with caution, two of the sources added.
The asset is being marketed off GBP 46.1m FY18 pro-forma EBITDA with adjustments including a number of recently opened homes still in ramp-up phase and a pipeline of homes in construction. First round bids are due 13 March, the first source added.
There’s been a few car crashes in the sector in the UK, including Terrafirma’s Four Seasons group, which is going through a restructuring, as reported.
As such, Care UK is likely to attract relatively conservative leverage pitches in the 4.5x – 5x range through all-senior loan structures or 4.5x via first lien and another turn through second lien for 5.5x leverage in total, the two of sources said. The group could go down the senior secured notes route at around 5.25x as well, the first source said.
Bridgepoint is selling the residential care homes part of the business of Care UK, with c.15% revenue growth and 14% margins, but is keeping the healthcare part of outsourcing services for NHS, the first source said.
While the sale of Care UK is the preferred route refinancing is also an option, the third and fourth sources familiar said.
Bridgepoint took Care UK private in 2010, valuing the company at EUR 480m.
Care UK’s Caa1 rated GBP 325m Libor+ 500bps first lien 2019 FRNs are indicated at 98.5/100, and its Caa3 rated GBP 75m L+ 750bps second lien 2020 FRNs are indicated at 99.25/101.25, according to Markit. Both the notes are currently redeemable at par.
Care UK provides health and social care services, working with local authorities and the UK’s National Health Service to provide a range of outsourced services including residential, community, specialist, primary and secondary healthcare.
The company has high ratings with 80% of all homes ranked as Good or Outstanding by the CQC. It is positioned in the premium market and had a proportion of self-pay residents of 43% last year compared to less than 20% for most other large operators.
Care UK invests significantly in its estate, developing more than 30 new homes over the past five years. As it takes more than a year to build and more than two years to reach full occupancy, the profit contribution from many of these homes is not yet reflected in published financials.
Bridgepoint and Rothschild declined to comment.
by Maryna Irkliyenko, Joelle Jefferis and Francesca Ficai