HPE Miami 2023 | Financing Healthcare Companies in a Challenging Market - McDermott Will & Emery

HPE Miami 2023 | Financing Healthcare Companies in a Challenging Market


During this session, Sam Koplik, Partner and Stephanie McCann, Partner and Co-Chair of Finance moderated a panel that provided key insights on financing strategies in the current market and discussed specific challenges and opportunities for healthcare financings.

Session panelists included:

  • Javier Casillas, Global Chief Credit Officer & Managing Director, WhiteHorse Capital
  • Matthew Evans, Managing Director, Head of Healthcare Finance, Monroe Capital
  • Scott Gallin, Partner, Linden Capital Partners
  • Scott Porter, Managing Director, Brightwood Capital Advisors


In Depth

Key takeaways included:

  1. In today’s economy, factors such as inflation, higher interest rates and geopolitical instability are no longer viewed as temporary hurdles. Consequently, lenders view creativity and opportunistic thinking as key to financing deals in this market. That said, the healthcare industry specifically is one of the best positioned to continue growing; lenders are not only seeing resilient demands for healthcare deals but would rather be supporting healthcare over a lot of other industries in the current economy.
  2. Over the past year, lender-friendly terms have become more prevalent in loan documentation. These terms include higher pricing and fees, reduced deal sizes, the absence of delayed draw term loan (DDTL) facilities, the inclusion of fixed-charge coverage ratio (FCCR) covenants and greater equity contributions from sponsors. While the prevalence of each term varies across the market and among specific lenders, most anticipate that higher pricing will be the first to soften once the market improves. Though lenders can be flexible on pricing, they have little wiggle room to soften other terms, particularly FCCR requirements. Nonetheless, the panelists emphasized that they are evaluating deals on a case-by-case basis as their role is to assess each situation on its merits and not just to follow the market blindly.
  3. To achieve better financing outcomes, it is essential to view lenders as business partners rather than faceless commodities. Current market conditions have prompted borrowers to seek closer relationships with their lenders, which has led to greater transparency with management teams and sponsors. This is a trend that lenders believe should continue. Accordingly, lenders are actively working to enhance existing relationships, focusing on meeting the needs of their established clients.
  4. Lenders are showing a strong interest in investing in smaller deals and have ample capital available to do so. This trend, coupled with a shift in valuation trends that allows buyers to pay less for smaller businesses, presents an excellent opportunity for sponsors. Lenders suggest that sponsors maintain open communication with them and also believe that most issues can be resolved through a combination of capital, time and level-headedness. According to the panelists, as long as there is a good deal to be made, the capital will follow suit.