KKR and China Resources Group investee GenesisCare has filed for bankruptcy in the US, a move that will leave the rest of the Australian-founded business under the control of a group of lenders led by Oaktree Capital Management.
The cancer care business announced on 1 June that it had filed for Chapter 11 bankruptcy in the US and planned to restructure its business which carries debt of around $2 billion.
The company said it had secured commitments, subject to court approval, for a debtor-in-possession financing facility which would provide $US200 million ($300 million) in new money from existing lenders to support its business operations.
The new debt funding would enable it to continue meeting its obligations across the entire 300-locations enterprise – including to patients, doctors, and employees – while it financially restructured. The company intended to explore separation of the US business from its businesses in Australia, Spain and the UK.
GenesisCare’s recently appointed chief executive, David Young, said the business played “a critical role for the patients, doctors and communities it serves”. But he added: “The past three years have presented significant operational and financial challenges, requiring a comprehensive restructuring.”
In Australia, GenesisCare was achieving year-over-year growth in treatment volumes and expected strong earnings in the 2024 financial year, Young said.
It is expected that GenesisCare’s US arm will be sold out of bankruptcy and that Oaktree and the other providers of the new financing facility will eventually achieve a debt-for-equity-swap to emerge as majority owners of the rest of the business.
KKR acquired a 63% stake in GenesisCare from Advent Private Capital and other shareholders in 2012. KKR exited to China Resources Group and Macquarie Group in 2016 but reinvested in 2019.
Last year (APE&VCJ, Aug 2022) GenesisCare divested its cardiology operations to Adamantem Capital saying that it had decided to concentrate on its main cancer care business. GenesisCare is believed to have received more than $200 million for the cardiology business which was rebranded as CardiCo.
In February, credit rating agency S&P downgraded GensisCare from CCC to CCC-.
In March, as it was considering funding proposals to enable it to continue operations, GenesisCare announced the departure of chief executive and founder Dan Collins.
The business then accepted an offer of $200 million in new credit from Oaktree and other lenders, including Canyon Partners, Bain Capital Credit, and Avenue Capital.
Prior to that it had been reported that earlier lenders to GenesisCare – which included Blackstone, Barclays, The Carlyle Group and Investcorp − had been selling the company’s debt on secondary markets for as low as 15 cents in the dollar.
When KKR exited to China Resources Group and Macquarie Group, GenesisCare was regarded as one of Australia’s most successful private equity-backed expansion stories. Talk then was all about expansion opportunities in China.
But rapid expansion, including acquisition of 21st Century Oncology, the largest independent radiotherapy provider in the US, left GenesisCare with a heavy debt load. Operations were disrupted by the pandemic and when interest rates began to rise it became clear the company was not growing fast enough to service $2 billion in debt.
GenesisCare is being advised by investment bank PJT Partners, restructuring advisor Avarez & Marsal, and legal firms Kirkland & Ellis, Herbert Smith Freehills and Jackson Walker.