October 1, 2018 / 8:50 AM / 2 months ago

UPDATE 1-Britain's BMI Healthcare agrees financial restructuring deal

(Adds details, background)

Oct 1 (Reuters) - Britain’s largest private healthcare group, BMI Healthcare, said on Monday it had agreed a deal with its creditors and landlords that would include recapitalising the business.

Hospital Topco, the parent company of the landlords for 35 of BMI Healthcare’s hospitals, as well as stakeholders and lenders, agreed to a deal which would bring BMI’s operations and 35 hospitals back under common ownership, BMI said.

The deal included injecting capital of at least 58 million pounds ($76 million), extending BMI’s bank facilities to 2024 and reducing annual rent by 65 million pounds, BMI said.

BMI said in a statement that contributions from the deal would fund a 250 million pound capital investment programme.

BMI Healthcare and other private hospital operators have been bogged down by costly rent agreements signed before the 2008 financial crisis, which made businesses vulnerable to a fixed annual increase in rents.

Apart from rising rents, healthcare firms have also had to deal with fewer referrals from Britain’s publicly funded National Health Service (NHS) and weaker private medical insurance demand.

The NHS, operating under a 1 billion pound deficit and a shortage of beds and staff, has been reducing referrals to companies that have been assisting with the shortage, such as BMI and Spire Healthcare, to save money.

As a result, BMI Healthcare’s majority owner and South Africa’s third-largest private hospital chain Netcare was forced to offload its 57 percent stake in the business in March, months after it looked at buying out the rest of the company.

Spire slashed its full-year earnings guidance in August and Ramsay Health Care, Australia’s biggest private hospital operator, also took a charge and cut its outlook for profit growth on a slump in business from the NHS.

$1 = 0.7665 pounds Reporting by Noor Zainab Hussain and Justin George Varghese in Bengaluru Editing by Louise Heavens and Edmund Blair

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