Saturday, October 15, 2011

PEU Health Care Deals Get More Expensive

Financing private equity health care deals for PPD and Kinetic Concepts got more expensive with the latest round of debt concerns.  The Carlyle Group's deal for PPD was the "third-largest and had the highest debt multiple of 2011 year to date," according to The Deal.  The story noted:

One knowledgeable private equity investor says, "The financing [caps] on that deal were 300 to 400 basis points above what it was three months ago." And flex provisions, which give banks wiggle room to change pricing if markets shift, have become dramatic due to bank fears of losses.
That means higher interest costs, courtesy of private equity underwriters (PEU's).  The Deal caught up with my earlier observation on PPD's lack of long term debt before selling out.  Health care costs are clearly not going down, not in a PEU invasion.