Nobilis Health loan agent BBVA Compass seeks commitments after pricing widens on deal

11 July 2017
Commitments were due today for BBVA Compass’ financing for Nobilis Health after pricing widened from L+ 475bps to the L+ 550-600bps range, said two sources close to the situation.
 
The credit facility consists of a USD 150m term loan, the sources said, with one source noting it also includes of a USD 25m revolver. The funds will be used to refinance Nobilis capital structure and support a USD 72m acquisition of four surgery centers.
 
The loan also includes a 99 OID and 1% Libor floor, the sources added.
 
Nobilis is a Houston-based developer and operator of hospitals and surgery centers. At present, it operates 25 locations in Texas and Arizona, and partners with 38 other facilities throughout the US, according to its website.
 
Pro forma the planned acquisitions, the funding would lever Nobilis at slightly under 3x, and slightly under 2.5x net over USD 30m in cash, the sources said, implying between USD 40m and USD 50m in adjusted EBITDA. The loan includes a 4x leverage covenant, one of the sources added.
 
Nobilis generated USD 35.6m in adjusted LTM EBITDA and USD 302.8m in LTM revenue through 31 March, according to an investor presentation.
 
The new loan deal would increase Nobilis’ cost of funding. As of 31 March its capital structure includes a BBVA-agented USD 52.5m term loan and USD 18m outstanding on a USD 30m revolver, both issued last year and bearing interest at an applicable margin of L+ 300bps-375bps, according to public filings.
 
Lender pushback on the deal stemmed in part from over half of Nobilis’ patients relying on out-of-network health insurance reimbursements, meaning revenue could be unreliable, the sources said.
 
Furthermore, Adeptus, an operator of hospitals and standalone emergency rooms that sources cited as a comparable credit, filed for bankruptcy earlier this year after succumbing to issues related to realizing revenue from payers and increased competition.
 
Nobilis closed trading today at USD 1.80 per share for a market capitalization of USD 143.94m, down from 2.36 per share on 11 July 2016.
 
Nobilis and BBVA did not return requests for comment.