The leaders of Surgery Partners are returning to the debt markets to help them invest in growth as the health care sector begins to look beyond COVID-19.
Brentwood-based Surgery Partners in March drew down nearly $113 million from its revolving credit facility and a month later borrowed another $120 million as many of the company’s facilities were running below 20 percent of their capacity. On Wednesday, CEO Eric Evans and his team provided investors with a glimpse at their bounce-back since spring as they detailed plans to raise another $115 million in debt scheduled to mature in 2027.
The headline: After an April in which case volumes at Surgery Partners’ 111 surgery centers and 16 surgical hospitals was just 19 percent of April 2019, May brought a big bounce to 74 percent of prior-year volumes and that number climbed to 93 percent in June. Last month, joint replacements more than tripled from a year ago — suggesting, the company says, a migration from hospital work to its facilities — while revenue per case from more profitable high-acuity patients was up 11 percent.
For the quarter, revenues are expected to be down 17 percent year over year to about $370 million while adjusted EBITDA is set to drop about 7 percent to $57 million.
The new notes Surgery Partners is selling are being tagged onto an $430 million offering completed in April of last year. The notes will pay 10 percent in interest and the expected $111 million net proceeds will go toward both general corporate purposes and to possible service line expansions and the recruiting of physicians as well as to investments in IT and potential acquisitions. The Surgery Center team expects to close on its latest debt sale late next week. In addition to their new funds, Evans and his team will have more than $200 million of cash and cash equivalents on hand as well as plenty of undrawn revolver capacity.
Shares of the company (Ticker: SGRY) were up more than 4 percent to $15.79 Thursday afternoon. They began 2020 around $16 but bottomed out at $4 during the market’s late-winter swoon.