Past relationships led PolyMedica Corp. to tapBanc of America Securities and Wachovia Bank to lead a five-year, $150 million facility for the Woburn, Mass.-based healthcare provider. The credit will be used for potential acquisitions and investments in PolyMedica, said Keith Jones, cfo. "We're evaluating a lot of different opportunities in the diabetes and pharmaceutical segments to complement and increase our size and scale in those markets." Jones said. "I see us leveraging our balance sheet and employing our capital research in areas that we hope will benefit shareholders."
The company previously took out a small facility to fund its acquisition of Liberty Health Care. The company repaid the debt quickly as the business grew exponentially generating about $40-50 million a year of free cash flow, Jones said. But since then PolyMedica has had no syndicated lines.
CEO Patrick Ryan and Jones had previously worked with Bank of America's syndication and health care groups at Physicians Dialysis, which was the nation's sixth largest dialysis provider, before they sold it to DaVita.
Ryan served as the chairman and ceo and Jones was the cfo and v.p. "It was an easy fit," Jones said of having B of A lead this facility. Jones also worked with First Union, now Wachovia, when he was the chief accounting officer/corporate controller at Renal Treatment Centers, a dialysis company that also merged with DaVita. He said he still has relationships with the bank. Citizens Bank, Key Bank, SunTrust Bank, CIBC, Deutsche Bank and UBS were all in the syndicate. "Wachovia and Citizens Bank have been strong supporters of PolyMedica, and we utilize them for other services: cash management, investments," Jones said.
Pricing is also cheap at LIBOR plus 75-125 basis points depending on PolyMedica's consolidated leverage ratio. Jones said the company's current ratio is zero; it generates about $75 million of EBITDA a year and does not have any debt on its books. "It's very good pricing," Jones said. "I think it's indicative of what our lenders felt was a good company, a strong company. Obviously we have no debt on our balance sheet; we have good cash flow and a good management team."
One banker said of the tight pricing, "I think this is reflective of strong market conditions out there for a company that is performing." He added, "It reflects relationship banks increasing appetite to commit capital to support future banking relationships."
In November, the company agreed to a $35 million settlement and signed a corporate integrity agreement with the Department of Justice and the Office of Inspector General of the Department of Health and Human Services following an investigation into its Medicare practices.
The company admitted no wrongdoing as part of the settlement. Ryan was brought on board just a month before the settlement was finalized and Jones joined PolyMedica in February. "They've settled that," the banker said regarding the investigation. "Once the company has settled, that is past history and it eliminates that concern. I don't think that was a factor in the financing."'