Genesis Health Ventures has closed a $515 million deal that was increased $100 million due to strong appetite for the health care sector. Lisa Salamon, director of investor relations at Genesis, said two weeks ago the company emerged from a "fun fifteen months of bankruptcy." Mellon Bank led the $290 million debtor-in-possession facility, but First Union, Goldman Sachs andGE Capital are leading the new facility. Salamon declined to comment on why the other banks stepped up to lead the exit financing. Upon oversubscription of the deal, Genesis decided to upsize the facility with a part of the proceeds paying off its outstanding DIP facility and the extra amount used to pay some leases and help finance the acquisition of American Pharmaceutical Services, said Salamon.
Salamon said company leverage is the big difference between now and when Genesis filed. The company is re-emerging with $600 million in debt compared to $2.5 billion when it filed. The environment has also changed with the passing of the Balanced Budget Refinancing Act, which pumps $3 billion into Medicare payments, she explained. Genesis filed for chapter 11 protection after drastic cuts in Medicare reimbursement and continued underpayment by most state funded Medicaid systems resulted in the company's inability to continue to meet debt obligations. A banker familiar with the deal said institutions and banks were comfortable with a strong story following a successful emergence from Chapter 11.The recent flight by investors to defensive sectors such as healthcare did not hurt either, added the banker.
The revolver, delayed draw-term loan and five and a half-year term loan "B" were originally slated at $125 million, $55 million and $235 million, respectively. Following oversubscription, the tranches now stand at $150 million, $80 million and $285 million respectively. After the credit received ratings of BB-/Ba3, pricing was reduced by 1/4% to LIBOR plus 3% on the revolver and LIBOR plus 31/ 2% on the term loans. The commitment fee on the delayed draw-term loan is 31/ 2%.