Radiology Partners touts recent $2.3B debt refinance, placing practice on ‘strong trajectory’
Industry giant Radiology Partners is sharing further details on its recent $2.3 billion debt refinancing.
Credit ratings agencies first shared word of the transactions in June, noting that the country’s largest radiology group recorded positive free cash flow in 2024 as its financial picture improved. Rad Partners reported Tuesday that the successful refi of its first-lien debt extends the loan’s maturities from 2029 to 2032.
Refinancing carries a lower interest cost and “strengthens” the El Segundo, California-based company’s cash position.
“This refinancing reflects both strong financial performance and the confidence investors and lenders have in RP’s business model and strategy,” Chairman and CEO Rich Whitney, MBA, said in a statement July 1. “This transaction positions us to continue investing in patient care, technology innovation, and strategic growth.”
Moody’s assigned a B2 rating to the new bonds on June 23, indicating they are “speculative grade” investments that carry high risk of default. Broken down they include a $390 million revolving credit line now expiring in 2030, $1.5 billion term loan (2032), and $800 million more in notes (also 2032), according to the ratings agency. In addition, the transactions shift the debts from partial pay-in-kind—an arrangement that has a borrower paying interest with additional debt—to cash pay.
Radiology Partners will use proceeds from the refinance to repay other debts due this year and in 2029, Moody’s analysts Adam Chaim and Ola Hannoun-Costa wrote. The practice’s debt-to-earnings ratio was roughly 7.7x as of March 31, down from 10x previously. Its leverage will decline to 7x in the next year and a half after earnings growth from “new business wins, ongoing pricing initiatives and business optimization, as well as organic volume growth.”
“The stable outlook reflects our expectation that Radiology Partners will gradually reduce its leverage and maintain very good liquidity in the next 12-18 months,” Moody’s analysts said.
Radiology Partners had $130 million in cash as of March 31 and an undrawn $390 million revolving credit line. In addition, the practice is expected to generate over $75 million more in free cash flow this year, excluding refinancing costs. This will provide RP with “improved working capital” and lower costs related to the No Surprises Act. Rad Partners was previously negatively impacted by the law aimed at curbing surprise medical bills for out-of-network care, with delayed claims collections. However, the Centers for Medicare & Medicaid Services reported recently that RP scored favorable NSA outcomes in 2024, winning disputes at a high rate.
In addition, RP has grappled with “rising labor costs,” debt market news publication 9fin noted June 24. The recent refinance will help RP move beyond a “cash burning phase,” with adjusted earnings tracking upward from $401 million in 2021 to $520 million last year, sources told 9fin. RP’s days of sales outstanding, which measures how long it takes to collect receivables, stopped increasing and is flattening. Sources told 9fin RP is taking a “more disciplined approach” by renegotiating contracts and “refocusing” its growth strategy. However, the recent refinance means certain majority-stake lenders will need to OK larger-scale transactions before they are finalized, Moody’s noted.
“The business has definitely taken a positive turn,” an anonymous bond portfolio manager told 9fin. “The quality of earnings have increased dramatically and it’s turned into a well-liked healthcare situation.”
Standard & Poor’s struck a more cautious tone in its own examination published June 20 and previously covered by Radiology Business. Their analysts noted that Rad Partners is “constrained” by high interest expenses and low-cash flow generation. However, both S&P and Moody’s issued credit ratings upgrades last month, “reinforcing RP’s commitment to disciplined financial management and maintaining a capital structure that supports longer-term business objectives,” the radiology practice said July 1.
“RP is on a strong financial and operational trajectory,” Whitney said in the statement. “We are focused on delivering for our patients, physician partners and clients—and this transaction ensures we have the capital resources to do just that for many years to come.”
Founded in 2012, Radiology Partners is backed by private equity firm Whistler Capital and VC group New Enterprise Associates. It employs approximately 4,000 physicians, servicing 3,400-plus sites (including 131 imaging centers) across all 50 states, and handling a total of 56 million cases annually.
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.