KKR’s Genesis Care targets US debt market

Yet another private equity-backed Australian company is tapping the US debt market.

Following successful debt issues by Gresham Private Equity-owned Barminco and Pacific Equity Partners-owned cinema operator Hoyts Group last month, a KKR-owned healthcare business, Genesis Care, has launched a refinancing of its own.

Genesis Care, an Australian provider of cardiology, cancer and sleep treatments, is seeking US$245m through a first-lien, senior secured Term Loan B issue, and another 30m Australian dollars (US$27.8m) through a revolving credit facility.

Standard & Poor’s assigned the company a corporate credit rating of B+, meaning the company’s debt will trade as junk bonds.

“Genesis’ ‘highly leveraged’ financial risk profile is a constraint on the ratings and reflects the company’s aggressive financial policies and minority ownership by a financial sponsor,” Standard & Poor’s credit analyst Graeme Ferguson said. “The stable outlook incorporates our expectation that Genesis will continue to benefit from the stable Australian healthcare funding environment, regulatory rationing of new radiation oncology sites, and a mix of organic and limited inorganic growth,” he added.

Following Genesis’s recapitalisation, the ratings agency estimates the company’s debt-to-earnings before interest, tax, depreciation and amortisation, or debt-to-Ebitda ratio, will rise to around 5 times, allowing some proceeds to be returned to equity holders including affiliates of KKR & Co., doctors and management.

Moody’s issued a provisional “(P) B1” corporate rating on Genesis Care.

“[Our ratings] reflect its small scale when compared to peers on a global basis and therefore a constrained ability to absorb temporary business disruptions, unexpected adverse effects of acquisitions or potential unfavourable material regulatory or reimbursement changes, should they occur,” Moody’s senior credit officer Ian Lewis said.

He added that the ratings reflect the company’s good growth prospects and its first-mover advantage as an aggregator of Australian health services.

KKR & Co.’s acquisition of a controlling stake in Genesis Care last year granted Melbourne-based private equity firm Advent Private Capital a successful exit.