Primedex Health Systems refinanced its bank debt just six months after the inked dried on the credit agreement. The Calif.-based diagnostic imaging services provider also sought new financing to fund its recent acquisition of Radiologix and for additional working capital. Mark Stolper, cfo, said he likes the ease with which his company can refinance bank debt. "It gives you the flexibility to get in and out of a deal. It is easy and inexpensive to refinance," he said.
Stolper explained there is no call protection on the bank debt, which makes it easy to refinance. He also said there is no pre-payment penalty on the first lien, which makes it inexpensive to take the debt out. There is, however, a pre-payment penalty on the second lien.
The new credit will back the company's acquisition of Radiologix, another diagnostic imaging services provider, and also refinances $180 million of bond debt on Radiologix's balance sheet. At the close of the acquisition in November, Primedex will change its name to Radnet, Inc. Before July, Primedex had also entered into a credit facility in March to increase liquidity (CIN, 3/17).
The new facility consists of a $45 million revolver, a $225 million term loan and a $135 million second lien. Fifty basis points were shaved off the new revolver and first lien, which are now priced at LIBOR plus 3 1/2%. Pricing on the second lien dropped 100 basis points to LIBOR plus 7 1/2%. Stolper said the pricing improved because of the company's larger size and its lower leverage. Since the last financing in March, it has delevered by increasing EBITDA by a couple of million dollars, said Stolper. He explained the high pricing on the second lien is because of the perceived risk of the diagnostic imaging sector. "There have been some visible failures in our industry," Stolper said. "There are some challenging credits. Peoples' view of the industry is reflected in the pricing."
GE Healthcare Financial Services leads the facility. The bank, which also led its previous financing, has good expertise in the healthcare sector, Stolper said. "We were extremely satisfied with the March refinancing. GE is very active in our industry. They are not only active on the capital market's side, they are also involved on the equipment services side. We have a close relationship with them in lots of facets of the business," he said.
The company added about 15 new lenders to its syndicate this time around. The larger size of the debt necessitated more lenders, Stolper said, adding that the company has also become more appealing to lenders. "It is a larger and more stable credit," he said.