GE Healthcare IT unit carveout backed by $850 million in loans

NEW YORK (LPC) - Private equity firm Veritas Capital has lined up $850m in leveraged loans to back its acquisition of GE Healthcare’s value-based care business, according to two sources familiar with the matter.

Veritas is buying the unit, which includes GE Healthcare’s enterprise financial management, ambulatory care management and workforce management software assets, from General Electric for US$1.05bn, according to a press release. The purchase was announced on April 2.

“The story here is it’s an orphaned business within GE, and equity sees the chance to refocus and realign it,” one of the sources said. “The business hasn’t kept up amid the pressures at GE.”

The financing includes a US$75m five-year revolving credit facility, a US$600m seven-year secured term loan with a first priority claim, and a US$175m eight-year secured term loan with a second priority claim, the sources said. The revolving credit will be undrawn at close.

Goldman Sachs will lead the senior term loan alongside Barclays and Deutsche Bank, the sources said. The junior term loan will be privately placed with Canadian pension fund manager PSP Investments, they said. PSP is also participating in the revolving credit.

PSP in 2015 launched a private debt platform, PSP Investments Holding USA LLC, which focuses on private placements and direct loans to leveraged borrowers. The fund, along with Ares Capital Management, provided a US$730m unsecured term loan in 2017 to KKR-owned US medical helicopter operator Air Medical Group Holdings to support its US$2.4bn purchase of ambulance services provider American Medical Response.

Syndication of the new debt is expected in late May or early June following completion of audited carveout financials, the sources said.

Goldman Sachs, Barclays and PSP declined to comment. Deutsche Bank and Veritas did not respond to requests for comment.

Veritas is no stranger to the healthcare technology sector. The buyout shop acquired US healthcare data analytics company Verscend Technologies from Verisk Health for US$820m in 2016. It sold peer Truven Health Analytics, which it bought from Thomson Reuters for US$1.25bn in 2012, to IBM for US$2.6bn in 2016.

The deal will be marketed on adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization of roughly US$135m, bringing the unit’s debt-to-Ebitda ratio to 4.4 times through the senior tranche and 5.74 times total, the sources said.

Equity capitalization will total at least US$275m based on the US$1.05bn enterprise value. That amount does not account for financing fees and expenses or additional funds to add cash to the balance sheet that would push the equity amount higher, the sources said.

The acquisition is expected to close in third quarter of 2018.