Health-Care Industry Mergers Bring a Wave of Credit Business to Banks
Goodwin, William, American Banker
Consolidation in the healthcare industry has generated a steady stream of financing business for banks, and the deal flow shows no sign of letting up.
The financings range from relatively modest-sized deals to transactions in the billions of dollars.
On Monday, for example, a clinical laboratory on the West Coast and a nursing home operator on the East Coast announed separate bank financings totaling $150 million.
In both cases, the funds will be used mainly for acquisitions.
On a much larger scale, HealthTrust Inc. is lining up roughly $1 billion in new bank financing as part of its pending acquisition of Epic holdings Inc. Just weeks ago, Columbia Healthcare Corp. completed a $3 billion refinancing with its banks, tied to its merger with HCA-Hospital Corporation of America.
Right now, the onsolidation sweeping the $900 billion health-care industry is taking place mainly in the for-profit sector. But if universal health-care coverage is adopted, a new round of consolidation could also grip the not-for-profit sector, said Elliott Jones, managing director of Chase Manhattan Bank's health-care group.
That means health-care financings could be one of the hottest bank businesses for years to come.
Standard & Poor's Corp. said mergers and acquisitions in the health-care field would likely be the main factor influencing the industry's debt ratings for the foreseeable future.
Many Below Investment Grade
About 80% of the health-care companies rated by S&P are below investment grade, though it's hard to predict how consolidation would affect the industry's ratings profile, S&P said in a report issued Monday.
"Over the next several years, the desire to grow - in one way or another - will contribute to generally low but possibly volatile ratings for industry participants," S&P analyst Michael Kaplan said in the report. …