StrangeTony,
S&P Global noted that Gentiva is exchanging its debt for a new issuance due 2031. It will borrow up to $3 billion to retire a debt package of $2.76 billion (that currently shows $2.43 billion owed).
The borrowing subsidiary is Charlotte Buyer which is under the control of majority owner Clayton, Dubilier & Rice, a financial rapscallion. CD&R Falcon Holdings is the entity that controls Gentiva.
I was able to find the interest rates paid on the current debt and estimate Gentiva Hospice pays over $200 million per year in interest expenses. Total revenue is around $2 billion. Interest expenses are roughly 10% of the money that comes in.
S&P Global showed projected recovery on the debt if Gentiva declared bankruptcy under CDR. They lowered the overall recovery rate from 55% to 50% and the rating dropped from a B to a B- in their new analysis.
Financial rapscallions need to keep Gentiva Hospice going until they can flip it for a major payday. Debt refinancing is a critical step for that cash bonanza to occur.
The big money boys still trust one another to make good on their debts. Financial crises tend to change that. Should that happen financial rapscallions are often on both sides of a company, the equity and debt. Bankruptcies mean affiliates, like Gentiva Hospice, change hands. The loaner of funds becomes the new owner.
The rapscallion game remains energized enough to keep Gentiva going. When that cools further or even ices, watch out. Chaos usually follows, which means the sorry hand given to employees gets far sorrier.
Anonymous
And it is not one layer of leverage.
ReplyDeleteThe portfolio company borrows to fund the acquisition.
The fund may have a bridge loan against the investment.
Then there is a NAV loan against the fund.
The co-invest is often levered itself.
The LPs are levered.
The people inside the firm are levered.
Around the edges there are liquidity lines where a man borrows against the distributions he expects to receive, or the bonus he has already mentally spent, so he can keep making the next capital call into the thing that is supposed to pay him back.
It is leverage on leverage on leverage, each layer justified by the layer beneath it, and all of it depends on the same assumption: the V in the Loan-to-Value is real.
https://mispricedassets.substack.com/p/the-smart-money-is-the-subprime-this
Flashback to May 2019 nearly a year into our new ownership with Humana, TPG & WCAS:
ReplyDeleteCEO Causby touched on benefits, that have only deteriorated under his watch, and our long promised merit raises. The company administered a benefit survey that asked about benefit trade offs and possible new benefits, most of which were nonsense, like maid or handyman.
Hospice President Larry Graham mentioned "enhanced benefits" in his talk but those words made no sense to my hospice coworkers. In the real world Causby and Graham took away our Employee Appreciation Day and Floating holiday for 2019.
David Causby said he wanted to "improve the benefit structure for all of our employees." If Causby, Graham, Humana CEO Bruce Broussard and our 60% financial rapscallion owners meant that then employees would have equity stakes in Kindred at Home and something other than a pittance for a retirement match. These executives are well aware of Kindred's miserly benefits package vs. Humana's.
Long promised merit raises remain a distant vision. Causby said executives are "looking at salary structure and plan to address merits in upcoming months for our company." Apparently raises remain under the vise grip of strong cost controls.
Graham dangled a golden future with Humana as our employer where executives would go above and beyond for patients and staff. Through redesigning for excellence opportunities will be created for employees.
Causby tempered Graham's lofty future by informing us executives did the heavy lifting in standing up our company up over the last ten months. He noted this transitional year had the company fully implementing HCHB in hospice which caused "a lot of stressful times." Causby said "hopefully there will be more opportunities within the organization for individuals to grow, but it wouldn't be right of me to say this is not going to be a bumpy year. I hope all of you can stay with us as go through this transition." Causby and Graham bumped five co-workers out the door via the Curo model.
https://generichospice.blogspot.com/2019/05/executive-fireside-chat-hot-air.html