Healthscope bidding deadline set as receivers plan rescue strategy

A break-up of Healthscope, which controls 37 hospitals, is the most likely outcome.

Potential buyers for collapsed private hospital operator Healthscope must submit expressions of interest by June 23, as receiver McGrathNicol develops a rescue plan, according to sources.

Receivers are expecting all expressions of interest within the next fortnight, adding to those made during former owner Brookfield’s earlier sale attempt.

Due diligence will start in mid to late July when a data room opens, with detailed assessment by bidders continuing in August.

Market sources anticipate that a break-up of Healthscope, which controls 37 hospitals, is the most likely outcome.

This scenario creates a risk that between five and 15 of the unprofitable hospitals close, unless state governments intervene.

Catholic not-for-profit healthcare providers are leading interest in Healthscope, though private equity firms are also eyeing specific assets.

Pacific Equity Partners-owned Healthe Care is reportedly interested in 12 hospitals, while Genesis Capital and Mercury Capital are considering Healthscope’s mental health facilities.

US investment bank Houlihan Lokey is assisting McGrathNicol with the sale process.

Not-for-profit operators hold a significant advantage, as payroll tax exemptions could provide about $100m in annual savings compared to commercial operators.

Any successful bidder would need an estimated $400m for capital expenditure requirements.

Previous interested parties during Brookfield’s initial sale process included Macquarie Group, Ramsay Health Care, St Vincent’s, St John of God, Calvary, Epworth, Cabrini Health and PEP.

Brookfield launched a sale process for Healthscope in March when the business it bought in 2019 for $4.4bn was unable to pay its rent or debt repayments.

The group sold 24 hospital properties to finance the $2bn deal in 2019, with the real estate now owned by interests of HMC Capital and Northwest Healthcare Properties REIT.

Brookfield owed about $1.6bn to a consortium of about 20 lenders at least, including Australia’s top four banks, but handed lenders the keys in the days before it was placed into receivership last month.

Distressed debt investors Polus Capital and Canyon Partners had bought some of the debt at a discounted price of about 40c in the dollar and are now understood to hold some sway in the dealings of the business.

Hurting private hospital operators has been higher staff costs and limited increases in payments for services from private health insurers that the industry argues have not kept up with inflation.