J.P. Morgan is the sole lead for a $135 million financing for Diagnostic Imaging Group. The facility, along with $84 million of equity contributed by Evercore Capital Partners and $34.7 million of rollover equity from existing shareholders, will be used to recapitalize the company, providing Evercore with a 64% stake.
The loan consists of a five-year, $25 million revolver and a seven-year, $110 million term loan "B." Both are priced at LIBOR plus 3%. It launched two weeks ago. Neeraj Mital, a partner at Evercore, said the firm decided to invest in Diagnostic Imaging because it was a high growth operation and the private-equity firm liked the sector. But some buysiders passed on the credit, concerned over the size of the company and the collateral. One portfolio manager described it as a "small mom and pop type company, way off the radar." Still he thinks it will get done because there is a lot of cash in the marketplace and investors are hungry for assets. "The book is building, the deal is going fine," said a J.P. Morgan spokesman. It is set to close next week.
Mital also countered that investors were not offering a fair description. "It's a business with well established operations in Florida and N.Y. and it is a well managed, briskly growing company," he said. He added, "Some people's concern with the credit reflects the performance of other companies and general capital market conditions."
Moody's Investors Service assigned a B2 rating to the facility reflecting the "significant amount of financial leverage being considered in the transaction resulting in constrained cash flows [and] the need for significant investment in capital expenditures for growth, which constrain free cash flow." Moody's also cites the company's track record of growth and healthy cash flow in the New York market.
The Hicksville, N.Y.-based company provides management services to diagnostic imaging centers in New York and Florida. It generated $119 million in revenues last year and has an EBITDA of $37.2 million for the last 12 months.