Healthscope lenders call meeting over hospital operator’s future

Healthscope is the country’s second largest private hospital operator.

The syndicate of about 20 Healthscope lenders who are owed about $1.4bn are holding a meeting in the next two days, sparking more speculation over whether the private hospital operator could be headed towards administration.

It comes after a lender holding loans worth about $300m tried in recent days to offload the debt, but it is not yet thought to have traded.

One possibility may be that buyers were not prepared to pay more than 40c in the dollar for the loans – around the price that other lenders had offloaded debt for earlier.

DataRoom understands that the meeting will take place within 48 hours and comes after Brookfield last week handed the keys of the business to its lenders.

Dealing with insolvent companies is highly complex and it can be challenging to agree an outcome among financiers without a receiver or administrator orchestrating proceedings, say market experts.

Sources say potential buyers of certain Healthscope hospital sites were interested on the proviso that rents were reduced by 10 to 15 per cent.

But some well-connected sources believe that given landlords would not reduce the rents, the only way that they would be recut is if the hospitals were placed into the hands of a receiver or administrator – automatically triggering a cancellation of the current contracts.

Others say that the termination of Healthscope’s leases was not its greatest worry.

Doubts have surfaced that the country’s second largest hospital operator has enough cash to continue for the next six months, potentially triggering concern among Healthscope’s directors about whether the healthcare provider was trading while insolvent.

As of last week, the group had $110m of cash on its balance sheet for operating costs. Its rent is not thought to be due until the start of next month.

Healthscope has already defaulted on rent to landlords and interest payments to lenders.

An administration of Healthscope would be highly complex, in that other lucrative contracts to the hospital operator would also be cancelled, but most expect that the business would continue to operate through a reorganisation of its affairs.

The situation places pressure on the government that relies on private hospitals to relieve the public health system of its overload.

The Anthony Albanese-led federal government may strike a deal with health insurance companies to increase payment rates to private hospitals for the reimbursement of their services to the insurance firm customers.

Healthscope operates 37 hospitals, and the majority are leased to two major landlords.

At least six hospitals are known to be currently profitable.

Brookfield bought Healthscope in 2019 for $4.4bn and sold most of its properties for $2bn.

Consortiums of hospital operators have been interested in buying some Healthscope hospitals after the business was placed up for sale by Moelis in recent months.

Compounding problems for Healthscope will be the high probability it will need to boost pay for nurses after aged-care nurses won the right for wage increases.