London-based debt investor Polus scoops up Healthscope loans

Brookfield-owned Healthscope operates 38 hospitals.

A new name has emerged as a potential contender to influence the outcome of Healthscope’s future, with European-based debt investor Polus Capital Management surfacing as a buyer of its loans.

DataRoom understands that Polus, based in London, has acquired between $50m and $100m of Healthscope’s debt at a time that loans were selling for about 40c to 50c in the dollar.

Polus says it invests across the capital structure and liquidity spectrum, focusing on leveraged credit, special situations and structured credit, and is backed by institutional investors like pension and sovereign wealth funds, insurance companies and family offices.

It comes after lenders owed about $1.4bn on the country’s second largest private hospital operator held a major lender call in recent days about the early results of a Moelis-advised sale process.

Healthscope is unable to meet debt or rent payments as it claims that high costs and limited reimbursement from insurers has been hurting the business.

The understanding is that some of Healthscope’s lenders in a syndicate of around 20 financiers believe that its loans are now worth more than 40c in the dollar based on the early results of the sale process.

As a consequence, they may agree to extend the interest payment holiday for the hospital operator, as requested by Healthscope.

Yet others are sceptical, as buyer interest from operators, which DataRoom understands includes not-for-profit groups like the Epworth Hospital Group, St John of God and St Vincent’s, is predicated on rent cuts of 10 to 15 per cent.

But adding optimism to lenders is the government’s pre-election commitment to support private hospital viability.

The Brookfield-owned operator of 38 hospitals is now playing down insolvency as a likely outcome.

Should Polus snap up more loans, it may offer some competition to Bain Capital, which is believe to be eager to buy Healthscope’s debt at discounted prices.

Meanwhile, David Di Pilla’s HMC Capital, the parent company of one of Healthscope’s major landlords, owning 11 sites, has also bought up to $100m of loans cheaply.

The Australian reported this week that as a landlord, it had leverage over Healthscope’s future and was in talks with alternative operators to take over leases after earlier flagging it was a potential suitor.

Ramsay Health Care boss Natalie Davis told the Macquarie Australia Conference that Ramsay was always looking at opportunities in the Australian market when assets came up, and it would be sensible.

This was when asked about Healthscope hospital acquisitions, but she added extracting value from its existing assets remained a focus.

Brookfield paid $4.4bn for Healthscope in 2019 and sold its properties for about $2bn.

Since then, escalating staff costs and limited funding increases from its insurance partners have placed further pressure on the loss-making business in the wake of the pandemic from 2020, and it has defaulted on rents and has been unable to meet debt obligations.