Private equity groups are believed to be circling GenesisCare’s Australian division with offers to acquire the unit at a time it is buckling under the debt woes fuelled by its United States arm.
GenesisCare’s Australian operations are the strongest part of the business and its US operations have brought on problems for the company where lenders are now applying pressure. Healthcare is in strong demand from private equity buyers, attracted to the earnings growth profile linked to the ageing population.
An acquisition by a buyer of its Australian operation would offer the owners, which include Kohlberg Kravis Roberts and China Resources, the opportunity to use the funds to pay down lenders and defend a Chapter 11 bankruptcy of the remaining US division.
One scenario on the table has been KKR buying out the debt positions of the other lenders.
Regardless of how the situation unfolds, the feeling now is that a major event in the form of either a Chapter 11 bankruptcy or a restructure is inevitable.
The company’s debt last year was close to $2bn and it had been trading last year at between 30c and 40c in the dollar.
GenesisCare’s first piece of debt matures in about two years.
Current lenders include Blackstone, Investcorp, Baring Private Equity, Bain Capital and The Carlyle Group.
Lazard is working for GenesisCare, and Houlihan Lokey and law firm Akin Gump Strauss Hauer & Feld are working for the GenesisCare lenders.
Ratings agency S&P Global recently said GenesisCare’s capital structure was unsustainable, and high debt and rising borrowing costs would worsen the liquidity pressure on GenesisCare – Australia’s largest cancer-care provider that also operates in the US and Europe. “We believe the Australia-based cancer-care service provider may undertake a distressed exchange or other form of debt restructuring that we would consider a default over the next six months,” it said.
Challenges have arisen for the business founded by Brisbane businessman Dan Collins since its purchase of US-based 21st Century Oncology, which it bought in 2020.
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