Capital One Healthcare’s corporate finance group has been named the No. 1 lead arranger for healthcare leveraged loans up to $1 billion, according to Thomson Reuters. The corporate finance team closed more than 110 transactions in 2016. Capital One Healthcare, which provides both corporate and real estate finance, closed more than 220 transactions in total.
“Over the past year we fused the Capital One and GE Capital, Healthcare Financial Services teams together into a seamless organization focused on serving our clients,” said Darren Alcus, President, Capital One Healthcare. “I’m proud to say that, as a part of Capital One, we’ve raised our game, maintained our market leadership, and expanded our capabilities.”
Capital One Healthcare is active across a broad range of healthcare sub-sectors—including long-term care, pharmaceuticals, medical devices, hospitals and outpatient services, healthcare IT, and medical properties—financing acquisitions, recapitalizations, and working capital needs.
“As the healthcare landscape continues to evolve over the coming year, we are looking forward to providing our clients with a broad range of financial products and services along with the resources of a top 10 U.S. bank,” Alcus said.
Below are details on each segment and examples of noteworthy 2016 transactions:
Corporate Finance
“This spring we witnessed a dramatic change in the market’s direction,” said Al Aria, Senior Managing Director of Capital One Healthcare’s corporate finance team. “The volatility and macro issues weighing down the leveraged loan and high-yield markets dissipated, allowing M&A deals to move forward.” As the year progressed, Aria noted, CLOs began to attract more investors, and the outflow from loan mutual funds slowed and then reversed. “By any measure, the market ended up in a much better place this year than where it began,” said Aria.
“Perhaps the biggest news for Capital One was the introduction of a new unitranche loan product,” Aria said. The program will be implemented by Capital One Healthcare with HPS Investment Partners, LLC as a strategic co-investor. “We can now offer our customers all the advantages of unitranche finance, including certainty of execution, simplicity and speed.”
The Corporate Finance team provides private equity and corporate customers with deep industry expertise in all aspects of healthcare financing, including acquisition, refinance and working capital.
Noteworthy transaction: In December, Capital One served as administrative agent, joint lead arranger and joint bookrunner for a $265 million senior credit facility to support Consonance Capital’s dividend recapitalization of Keystone Peer Review Organization Holdings, Inc. (KEPRO), the nation’s largest CMS-designated quality improvement organization and care management organization.
Real Estate
Jim Seymour, Senior Managing Director of Capital One Healthcare’s real estate financing team, noted that the real estate industry was a tale of two markets. “The market for medical office buildings was particularly robust last year. We saw strong deal flow, driven in part by hospital monetization and consolidation,” Seymour said. “Private buyers took a more active role, as private REITs moved to the sidelines and some public REITs were net sellers of assets for the first time in many years.”
At the same time, the skilled nursing and seniors housing markets both experienced some short-term adjustments this year. “Operating performance for some SNF operators was choppy as they continue to respond to changes in the post-acute space,” Seymour said. “In seniors housing, while the long-term outlook remains very strong, operators continued to monitor flattening short-term growth as the result of new assisted living and memory care properties that some markets have yet to absorb, as well as increasing labor cost pressure.”
The real estate finance team provides customized solutions to the medical properties and seniors housing and care sectors. Products include first mortgages, interim financing and acquisition financing for healthcare investors, operators, and developers. In addition, they offer balance sheet and Agency financing through a single, product-agnostic originations team.
Noteworthy transaction: In December, the Capital One team served as the lead arranger and bookrunner for a $535 million loan for the acquisition of 34 medical office properties—one of the largest medical office transactions of the year. The borrower is a subsidiary of Starwood Property Trust, the largest commercial mortgage real estate investment trust in the United States. The team leveraged its deep expertise in the medical office space to finance this diverse, geographically-dispersed portfolio of properties which includes both on and off hospital campus locations as well as single and multi-tenanted properties.