Receivers grant extra time for potential Healthscope suitors

Anyone who takes on Healthscope would need an estimated $400m to pay for its capital spending needs, some have suggested.

Healthscope receiver McGrathNicol has extended the timing of the sale process, with indicative non-binding offers for the ailing health provider now due next month.

First round offers were initially due on June 30, but the timeline has been pushed back to July 7.

Parties are expected to carry out extensive due diligence in August before final offers land in September.

It comes as a number of private equity firms and not-for-profit hospital operators circle Healthscope with plans to bid.

DataRoom understands that interest exists for the group as a whole, despite many market participants believing a break-up is on the cards.

A preference is likely given to a buyer with a longer-term ownership horizon, which may exclude private equity buyers.

A live option remains the lenders, which have frozen interest payments owing for a year, retaining the business that would continue to be run by current management.

Crucial to Healthscope’s success will be a restructuring of its debt, reset of its rents and also better payment terms with health insurance providers.

As earlier reported, Pacific Equity Partners’ Healthe Care was interested, while Mercury Capital and Genesis Capital have eyed some of the mental health facilities.

Ramsay Health Care was understood to be interested in taking on the five best hospitals in the portfolio.

Of the not-for-profit operators, Calvary had strong interest, while St Vincent’s was interested, along with St John of God.

However, sources suggest that the Albanese government would be unlikely to gain comfort with the entire business being controlled by a Catholic organisation given its position on reproductive and voluntary assisted dying services.

Assisting McGrathNicol with the sale process is Houlihan Lokey, after providing earlier advice to Healthscope’s lenders.

Anyone who takes on Healthscope would need an estimated $400m to pay for its capital spending needs, some have suggested.

Brookfield launched a sale process for Healthscope in March when the business it bought in 2019 for $4.4bn was unable to pay its rent or debt repayments.

The group sold 24 hospital properties to finance the deal in 2019 for $2bn, with the landlords of those assets now being Northwest Properties REIT and the interests of HMC Capital, including its HealthCo Healthcare and Wellness REIT.

Brookfield owed about $1.6bn to a consortium of about 20 lenders at least, including Australia’s top four banks, but handed lenders the keys in the days before it was placed into receivership in May.

Distressed debt investor Polus Capital has purchased about $300m of the loans for 40c in the dollar, while peers Canyon Partners and Elliott Management also bought some of the loans.

Hurting private hospital operators have been higher staffing costs and limited increases in payments for services from private health insurers that the industry argues have not kept up with inflation.