Ramsay, Pacific Equity Partners win exclusive due diligence on Healthscope hospitals

Ramsay Health Care, Mater Hospital, Calvary Health Care and Pacific Equity Partners are among the groups that have been granted exclusive due diligence to buy some of Healthscope’s hospitals, DataRoom can reveal.

This column understands that Healthscope’s receiver, McGrath Nicol, agreed to grant Ramsay Health Care, which is the country’s largest private hospital operator, exclusive due diligence rights on the National Capital Private Hospital in Canberra.

Meanwhile, Pacific Equity Partners, which owns Healthe Care – the third largest for-profit private hospital operator, has gained exclusive due diligence rights to buy the Prince of Wales Hospital in Sydney, one of the largest private hospitals operated by Healthscope.

Mater Health has emerged as the bidder that has gained exclusive due diligence rights to buy the Gold Coast Private Hospital from the receivers.

It comes as receivers reject an offer from the Jefferies-advised Calvary Health Care to buy 12 of the hospitals leased from the landlord Northwest Health Care after DataRoom understands the Catholic not-for-profit operator, together with the landlord, had offered between $100m and $140m.

Hedge fund lenders with over 30 per cent of debt, Polus Capital and Canyon Partners, blocked the deal, say sources.

They were holding out for higher profits, after buying debt at 50c in the dollar and

looking for a higher return as they targeted a $150m profit and 40 per cent windfall on their investment.

The lending syndicate is now proposing the hospitals are retained by Healthscope as part of its proposal to transform into a not-for-profit operator and refinance the debt. This would allow lenders to secure their windfall later, once the hosptial operator returns to profitability.

DataRoom reported earlier this week that the receiver of the country’s second largest private hospital operator had selected parties to carry out exclusive due diligence on four hospitals within the Healthscope portfolio, and this column has now learned Prince of Wales has been added to this list.

Holmesglen Private Hospital in Melbourne was one of the four, and exclusive due diligence rights is believed to be with Calvary Health Care, which has also won the right to carry out exclusive due diligence to buy Hobart Private Hospital.

However, Cabrini Health was also bidding for Homesglen.

A sale process has been run with help from investment bank Houlihan Lokey.

Mater has a large not-for-profit network in Queensland with hospitals in multiple locations such as Brisbane and Townsville.

DataRoom understands that on Monday at Healthscope chief executive Tino La Spina to provided updates on the latest developments from the sale process.

It is understood Healthscope has continued to lobby for its proposal where it retains the business, transitions to a not-for-profit operating model, recapitalises the debt, and lenders are paid back once the hospital group is back on its feet and making a profit.

Lenders are owed $1.6bn and some expected that they would get over 55c in the dollar on their investment.

The top-tier hospitals are potentially attracting a price of $600m combined.

It’s still unclear what operators take the 11 operations leased from the interests of HMC Capital, but Epworth HealthCare has been in talks.

Healthscope collapsed in May after the business was purchased by Brookfield in 2019 for $4.4bn.

To finance the transaction at the time, Brookfield sold about 22 of Healthscope’s property sites for $2bn to real estate groups.

The remaining properties where the hospitals are located are held on Healthscope’s own balance sheet or leased from governments.

Final bids in the sale process were received at the end of last month.

A number of Healthscope’s 37 hospitals are loss making and the challenge has been finding a way for the operations to remain open.

Not-for-profit healthcare operators do not pay payroll tax, which ranges from 2.5 per cent to 6.5 per cent.

It is estimated the saving adds about $100m in annual earnings to the Healthscope bottom line.