Radiology Partners seeks to raise $300M in preferred equity, reschedule debt due dates
Radiology Partners is seeking to raise at least $300 million in preferred equity to strengthen its financial position and flexibility, according to a report published Friday.
Debt Wire shared the news, citing three unnamed sources familiar with the matter. El Segundo, California-based Rad Partners declined to comment to the website but issued an announcement the same day outlining plans to refinance its debts, which face looming due dates.
RP, which bills itself as the largest radiology practice in the U.S., is commencing a “comprehensive” set of refinancing transactions to better position the company for “continued growth.” The lender-approved maneuvers include extending the maturity date of its revolving credit line from 2024 to 2028, along with pushing back the same for its first lien term loan from 2025 to 2029.
This comes after S&P Global Ratings recently placed Rad Partners on CreditWatch with “negative implications,” citing the rising risk of a payment default.
“We are appreciative of the long-term support of our lenders and equity partners, which has been a key ingredient to our success,” Rod Owen, MD, a Rad Partners radiologist and director of its board, said in a Jan. 19 announcement. “This set of transactions will position us to accelerate progress on our mission to transform radiology and broaden our positive impact on patients and the healthcare system.”
The company is also offering to exchange its senior secured notes due in 2025 for new first lien notes due in 2029. Same for RP’s senior unsecured notes due in 2028, swapping for new notes due in 2030.
Debt wire said Friday’s news sent Rad Partners’ debt up “sharply.” The company’s $800 million, 5.25% senior secured notes (due in 2025) were trading at 91 for a yield of 10.61% compared to 82.5 Tuesday. And its $710 million senior secured notes (due in 2028) were trading at 65.5 Friday, a 10-point rally from the last trade of 51.9 earlier this month.
RP has seen its financial picture improve, according to the report, with third-quarter 2023 earnings up 11.5% year over year, at $126.1 million. Liquidity was at roughly $161 million at the end of September, including $56.8 million in cash and $104.2 million available on its revolving credit line. At the time, Rad Partners’ net leverage was roughly 6.7x, according to Debt Wire, including $500.32 million in adjusted earnings against $3.35 billion in net debt.
Founded in 2012, Radiology Partners employs over 3,600 physicians who services 3,300 hospitals and outpatient facilities across all 50 states. Radiologists own 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.
Kirkland & Ellis and Sidley Austin are acting as legal counsel to Radiology Partners in the transactions, while Moelis & Company LLC is serving as its financial advisor. Gibson Dunn LLP and Centerview Partners, meanwhile, are guiding RP’s lenders, according to the announcement.
Moody’s and S&P, which recently issued separate credit downgrades for Rad Partners, did not immediately respond to a Radiology Business request for comment Friday.
Read previous coverage about Rad Partners below.
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.