FleetBoston Financial and Bank of America are set to launch next Tuesday syndication of a $300 million credit for Team Health backing the $147 million acquisition of Spectrum Healthcare. The credit, which includes a $150 million "B" term loan, also refinances $110 million in existing debt led by the two relationship banks. A decision was made to finance the acquisition with bank debt, rather than bonds or equity, because of perceived investor appetite for health care in the bank market.
"Team Health currently has a $50 million revolver that we wanted to upsize to $75 million and after dialogue with the banks, we determined pricing would be good due to demand in the bank market," noted David Jones, Team's cfo. The deal breaks down into a $75 million revolver and a $75 million "A" term loan priced at LIBOR plus 2 3/4% and the "B" carries a LIBOR plus 3 1/4% spread. Total debt to EBITDA after the transaction will be 3.7 times on a net basis and senior debt to EBITDA will be 2.4 times.
Team Health became aware of the transaction after Lehman Brothers ran an auction, Jones noted. "We knew Spectrum through industry knowledge," he added. The acquisition will provide diversity to Team, which provides outsourced physician staffing to hospitals and concentrates on emergency wards, he noted. The existing lending relationship with the banks was an important factor in selecting the leads, Jones noted. "Fleet and B of A have demonstrated continued support to the healthcare market," he stated. Bill Bowen, managing director and head of syndicated health care finance at Bank of America, Pat Godfrey, William Rogers and Ginger Stolzenthaler at Fleet are the point people for the company and banks. Finally, three equity funds invest in Team, Madison Dearborn Partners, Cornerstone Equity and Beecken Petty & Company. Those sponsor relationships are also important to the company and banks, Jones added.