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Amortization Terms Lead Essent Healthcare To GMAC

16 Jan 2004

Essent Healthcare has completed a new $75 million credit backing the acquisition of a hospital in Paris, Texas.

Essent Healthcare has completed a new $75 million credit backing the acquisition of a hospital in Paris, Texas. The deal is broken down into a $55 million term loan and $20 million revolver, led by GMAC-RFC Health Capital. Essent established a new relationship with GMAC on the transaction, according to Michael Browder, Essent's executive v.p. and cfo.

In order to find financing, Essent conducted a formal search process with the assistance of Rob Fraiman, head of BMO Financial Group's Harris Nesbitt Gerard Healthcare Group. Essent requested proposals from nine different companies, including a couple of commercial banks, merchant banks and more healthcare-focused institutions that have the capacity for both a term loan and revolver, Browder said. Essent received proposals from six of the nine institutions, pursued three and ultimately chose GMAC. The level of debt service was a key differentiator between GMAC and other proposals, Browder said. "The way they structured the credit was more akin to a real estate loan, which gave some advantages in terms, specifically the current pay terms." he added. "There is a slower amortization of the term portion of the loan."

In addition, GMAC's timeliness way a key factor for Essent. "We were in a situation to close our purchase where we did not have much appetite for execution risk," Browder said. "GMAC showed commitment for closing in the timeframe we needed to close our acquisition." Pricing on the transaction was not disclosed. In addition to the loan, the company raised equity to back the acquisition. Browder believes the relationship with GMAC will continue. "We're very happy with the GMAC relationship for the foreseeable future, but as we acquire new hospitals, we'll continue to look and see what makes the most sense for the company," he said.

16 Jan 2004