RLPC-GHG in talks to restructure $3bn debt pile-sources

LONDON Mon Feb 11, 2013 1:29pm EST

LONDON Feb 11 (Reuters) - Lenders to Britain's General Healthcare Group (GHG) are in talks on a restructuring of its around 2 billion pound ($3.1 billion) debt pile, banking sources said on Monday, in a process which threatens to leave them nursing heavy losses.

The company, one of Britain's largest independent healthcare services providers, was bought in 2006 by a consortium comprising Apax Partners, Brockton Capital, London & Regional Properties and Netcare (which bankers say subsequently also bought Brockton's share of the business).

That group was backed by 2 billion pounds of borrowing, split between 315 million at its operating business (opco) - known as BMI Healthcare - and 1.65 billion at its property arm (propco), according to Thomson Reuters LPC data.

The debt matures later this year, bankers said.

GHG has suffered in the economic downturn, which has led to a drop in demand for private healthcare as consumers reign in spending, bankers said, undermining its debt-based model.

In the same sector, Southern Cross collapsed in 2011 after defaulting on its debt.

Lazard and PwC are advising lenders and are working with a steering committee of lenders led by Barclays , Mizuho and Pfandbriefbank to find ways to deal with GHG's debt burden, the banking sources said.

Options include an extension of GHG's debt; an equity injection by shareholders; or a debt-for-equity swap whereby lenders agree to wipe out debt in return for a portion of the business, bankers said.

GHG declined to comment.

The opco debt has been reduced to around 234 million pounds but the propco is struggling with its huge debt pile, bankers said.

An opco/propco structure, as it is commonly referred to, involves the propco's debt being serviced with rent payments from the opco.

The propco loans are almost worthless, quoted in Europe's secondary loan market at 8 percent of face value, according to TRLPC data. However, one trader quoted them as low at 1 percent of face value. This means lenders could suffer heavy losses in a restructuring, bankers said

The company's opco loans are quoted in distressed territory at 77.5 percent of face value, according to TRLPC data.