Healthscope receiver set to rule on Calvary hospital deal

Healthscope collapsed in May with $1.6bn of debt and final bids were received for the business last week. Picture: Nadir Kinani

Healthscope’s receiver is expected to this week determine whether it approves of Calvary buying the 12 Healthscope hospitals leased from landlord Northwest Healthcare Properties.

While the not-for-profit hospital operator and Northwest have agreed on a deal for it to take the sites, it needs the blessing of receiver McGrath Nicol to happen, as the insolvency firm installed into the company by Healthscope’s lenders has the final say.

Northwest was originally prepared to strike a deal with the owner of hospital group Healthe Care, Pacific Equity Partners.

But PEP was unable to put forward such lucrative terms for the Healthscope hospitals, as Calvary had a significant advantage as it did not need to contribute payroll tax because it is a not-for-profit operator.

It’s estimated that payroll tax creates a $100m annual hit to the bottom line across the Healthscope business.

Ramsay Health Care is understood to have bid for the National Capital Private Hospital in Canberra.

While Healthscope’s lenders could face a hit of 50c in the dollar to their original investment in the loans offered to the country’s second largest private hospital operator, hedge funds which bought in at a later stage are set to reap a windfall.

London-based Polus Capital Management and LA-based Canyon Partners bought Healthscope loans in the past year for about 50c in the dollar and control 30 per cent of the debt.

They hope to make at least $150m and a total return of more than 40 per cent.

Catholic not-for-profit St John of God is making attempts to gain some of its best east coast assets, as earlier reported, while Epworth Healthcare is eager to buy the Knox Private Hospital in Melbourne – the best of the hospitals leased to the David Di Pilla-controlled landlord HMC Capital and its funds.

Final bids in the Healthscope auction were received last Wednesday.

Meanwhile, HMC Capital, which controls 11 properties in its funds, which include the listed satellite fund HealthCo Healthcare & Wellness REIT, is negotiating with individual tenants for each of its hospital sites leased to Healthscope.

As earlier reported, Catholic hospital operators Calvary and Mater Hospital Group have formed a strategic alliance in the race to buy Healthscope.

The Jefferies-advised Calvary will immediately on-sell key Queensland assets to its new ally if it is successful buying assets.

Healthscope collapsed in May with $1.6bn of debt, leaving receivers to navigate a sale process complicated by the company’s 2019 sale-leaseback arrangements under which its property portfolio was sold to various landlords for about $2bn.

Brookfield bought Healthscope in 2019 for $4.4bn and sold about 22 properties to Northwest Healthcare and Medical Properties Trust for about $2bn combined to finance the original acquisition.

Medical Properties later on-sold the properties to HMC Capital.