By Claire Ruckin
LONDON Feb 12 Lenders to Britain's General
Healthcare Group (GHG) are in talks to restructure its around 2
billion pounds ($3.1 billion) of debt, in a process which
threatens to leave them nursing heavy losses, banking sources
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. The latter subsequently bought
Brockton's share of the business, bankers said.
The 2006 deal was backed by 2 billion pounds of borrowings,
split 315 million at the operating business (opco) - known as
BMI Healthcare - and 1.65 billion at the 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 rein in
spending, bankers said. 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 borrowings have been reduced to around 234 million
pounds but the propco is struggling with its huge debt pile,
An opco/propco structure, as it is commonly referred to,
involves the propco's debt being serviced with rent payments
from the opco.
A spokesman for BMI Healthcare said: "BMI Healthcare is not
threatened by the situation around the GHG property company
refinancing its borrowings."
"The GHG PropCos' debts are non-recourse to BMI Healthcare,
and BMI Healthcare has robust 29-year leases with fixed rental
schedules and no change of ownership clauses, to remain in the
hospital properties. BMI Healthcare continues to trade
profitably as evidenced by our recently published results."
The propco loans are almost worthless, quoted in Europe's
secondary loan market at 8 percent of face value, according to
Thomson Reuters LPC data. 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 opco loans are quoted in distressed territory at 77.5
percent of face value, according to Thomson Reuters LPC data.