Radiology Partners lenders bringing on more advisors
29th June 2023
An ad hoc group of lenders to Radiology Partners Holdings is engaging with financial advisors, in addition to consulting with lawyers at Gibson Dunn, said three sources familiar with the matter.
The lenders are expected to hire a FA in the near term, one of the sources added.
Lenders want to be prepared in the event the company explores options to address its liquidity and upcoming debt maturities, the second source said. The ad hoc group represents more than 50% of the company’s USD 1.6bn term loan due in 2025.
For its part, Radiology Partners has been working with Barclays to attempt to raise preferred equity.
The company’s liquidity has been under pressure as rising employee costs and delays in collecting receivables due to the No Surprises Act have reduced free cash flow, according to ratings agencies. In response, Radiology Partners pivoted from pursuing rapid growth to improving the performance of its business.
The company ended March with USD 70m in cash on hand and USD 105m available on its USD 440m revolver due November 2024, according to S&P Global Ratings. The agency said it believes the company has enough liquidity to meet its needs over the next 12 months but has little room for cushion.
In early June, S&P downgraded the issuer credit rating to CCC+ from B-, the secured debt rating to CCC+ and the unsecured debt to CCC-.
Looming over the company, which describes itself as the largest radiology practice in the US, is a substantial maturity wall over the next two years.
Along with the revolver maturing in 2024, Radiology Partners has the USD 1.6bn L+ 425bps first-lien term loan and USD 800m 5.25% secured notes due in July 2025 and USD 638m in 9.25% unsecured notes due in 2028.
The first lien term loan was last quoted at 75/76.81 on Markit, while the secured notes traded 27 June at 73.75 for a yield of 19.1%, according to MarketAxess. The unsecured notes traded earlier in June at 38 for a yield of 39.36%.
The company’s ownership structure could complicate any talks with creditors, owing to the physicians’ large equity stake in the business, one of the sources said.
Doctors own a stake of just under 39%, followed by a 31.6% holding owned by Whistler Capital Partners, a 19.6% stake owned by New Enterprise Associates and a 10% stake held by Future Fund, according to Moody’s.
Barclays previously advised Radiology Partners in 2019 when it raised USD 700m from a predecessor fund to Whistler.
Radiology Partners and Barcalys declined to comment. Whistler, NEA and Gibson Dunn did not return requests for comment.