Radiology Partners clears key hurdle in plan to expand overseas
Radiology Partners has cleared a key hurdle in plans to expand its teleradiology presence overseas.
America’s largest imaging group on Monday announced that its bondholders have approved a request to change the terms of its existing debts. This paves the way for Rad Partners to acquire London-based remote-reading firm Everlight Radiology for a reported $715 million, according to Australian news media.
The deal, first announced in August, would give RP one of the world’s largest international teleradiology outfits. Founded in 2006, Everlight employs approximately 800 radiologists in 40 countries, serving hospitals and imaging centers across the U.K., Ireland, Australia, New Zealand and South Africa.
Rad Partners estimated on Oct. 12 that about 99.21% of note holders approved the amendments. As part of the process, lenders are eligible to receive a “consent fee,” representing 2% of the aggregate principal amount.
S&P Global Ratings revealed further details about financing of the transaction in a news update published Oct. 6. Rad Partners is taking out a new incremental, $485 million term loan, due in 2032, to fund the purchase. S&P assigned a “3” recovery rating to these debts, indicating its expectation for “meaningful” recovery (about 50% to 70% of the balance), if RP defaults on the loan.
Rad Partners is using the proceeds—coupled with $180 million in cash and $145 million of rollover equity—to fund the acquisition and any associated fees. The practice is concurrently increasing the capacity of its revolving credit line, which remains undrawn, from $415 million up to $520 million. Rad Partners also is paying down about $67 million of its $832 million in second lien notes due in 2030, according to S&P.
“We view the acquisition as a logical extension of Radiology Partners’ vRad teleradiology platform and opportunity to introduce its AI-enabled reporting and drafting tools (Mosaic) across Everlight’s base, subject to regulatory clearance in each market,” analysts Alex Rodriguez and David A. Kaplan wrote. “The acquisition adds non-U.S. revenue streams contracted directly with providers and improves the company’s scale and diversification,” they added.
S&P estimates that Rad Partners debt-to-earnings ratio will remain at 9.5x to 10x in 2026, declining to around 9x through the end of 2027. The agency expects the added interest burden to offset any incremental earnings added from Everlight, “leaving free cash flow broadly unchanged.”
“Our ratings on Radiology Partners remain constrained by substantial payment-in-kind interest and our expectation that free cash flow will be limited over the next 12 months,” Rodriguez and Kaplan added. “The company continues to invest heavily in Mosaic and navigate ongoing headwinds related to physician compensation, the No Surprises Act of 2022, and payer litigation.”
Rad Partners' capital structure currently consists of a $1.875 billion first-lien term loan due in 2032; another $900 million of senior secured notes due in 2032; $766 million of second-lien notes due in 2030; and $11 million more in unsecured notes, according to S&P.
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.