Radiology Partners raises $720M in ‘growth equity’—more than double its target

The nation’s largest radiology practice has raised $720 million in “growth equity” investments, more than twice what it had originally hoped.

Radiology Partners first announced in January that it was seeking $300 million in new support to strengthen its financial picture. However, the El Segundo, California-based practice has bested that amount by 140% amid strong investor interest.

RP also has closed previously announced debt restructuring transactions as the organization has faced pressure under the weight of billions in liabilities. This includes “meaningfully” reducing the company’s debt load and successfully pushing back maturity dates to between 2028 and 2030.

Rad Partners plans to retain more than $500 million of the new equity to fuel “continued growth and investment in innovation.”

“We are pleased to have completed the final steps in our comprehensive financing plan,” founder and CEO Rich Whitney, MBA, said in an announcement issued Thursday afternoon. “We are poised to move forward with the resources and flexibility to continue to expand our clinical services and extend our technology and AI capabilities,” he added. “The equity raise, which we believe to be the second largest growth financing in the healthcare industry in the past two years, underscores the strength of our practice, our leadership position in healthcare and the value we bring to our patients and our client partners.” [RP did not immediately respond to a question about this quote late Thursday.]

The debt swaps include exchanging Rad Partners’ senior unsecured notes (due in 2028) for new second lien notes (now due in 2030). Last month, S&P Global Ratings labeled this transaction as a “distressed” debt exchange, with the obligations “highly vulnerable” to nonpayment. Default, ratings analysts claimed, was “expected to be a virtual certainty.”

S&P did not immediately respond to a Radiology Business request for comment Thursday. While agency analysts previously said they planned to classify RP’s modified debt as “distressed,” once the practice finalized its restructuring, they spoke favorably of prospective new investments.

“We expect the capital raise and extension of maturities to alleviate near-term liquidity shortfalls, which will give the company time to resolve the working capital shortfalls, address operational challenges, and start reaping benefits from investment in new sites and cost-saving initiatives,” analysts wrote Jan. 26.

Rad Partners said the financing comes from both new and existing investors. The practice could not immediately provide details on the breakdown of contributors late Thursday.

Kirkland & Ellis and Sidley Austin served as legal counsel to Rad Partners in the transaction, while Moelis & Company and Barclays Capital provided financial guidance. Gibson Dunn and Centerview Partners acted as legal and financial advisors to certain RP lenders. 

Radiology Partners employs over 3,600 physicians who service 3,300 hospitals and outpatient facilities across all 50 states. Prior to Thursday’s news, physicians owned about 33% of the company, with private equity firm Whistler Capital, venture capital group New Enterprise Associates and the Australian sovereign wealth Future Fund holding the balance. RP could not provide an updated breakdown of its post-transaction ownership structure as of late Thursday.

This is a developing story. Radiology Business will have further details.

Marty Stempniak

Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic. 

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