To prepare for new financing opportunities health care lender MidCap Financial LLC has expanded its credit facilities, giving it $1.4 billion in lending capacity.
MidCap Financial is positioning itself for anticipated future demand, Howard Widra, the CEO of the Bethesda, Md., finance company, told Buyouts. The company has $600 million of loans outstanding against the $1.4 billion total, he said.
“Private equity firms are sitting on a lot of money, and there’s a great amount of refinancing coming due in 2012 and 2013,” Widra said. “There is a great deal of pent-up demand for debt, and there is also a great deal of unutilized capital out there.”
MidCap Financial announced this month that it renegotiated terms and extended maturities on its four primary credit facilities, to obtain improved structures and reduced pricing. The company’s $1.4 billion in lending capacity includes $900 million of debt commitments from 12 lenders, including Wells Fargo & Co., Goldman Sachs Bank USA, Key Equipment Finance, SunTrust Bank, Capital One and Silicon Valley Bank. Its arrangements allow it to expand capacity in the future as needed, he said.
In addition, MidCap Financial has $500 million in commitments from its three equity sponsors,
Although MidCap Financial itself is sponsor-backed, leveraged lending accounts for only about 20 percent of its business, Widra said, but sponsors are involved one way or another in about half of the firm’s portfolio. The lender also offers collateralized working capital loans, real estate loans, and debt for late-stage venture-backed startups such as pharmaceutical, biotech, and medical device companies.
MidCap Financial, which also has offices in Chicago and Los Angeles, specializes in $5 million to $200 million loans and can syndicate loans that are larger than it wants to hold, exclusively to health care companies, Widra said. Some observers might consider the concentration in a single industry as a risk for a lender, but Widra argued that its range of products for health-care companies provides it both improved risk and deep vertical expertise.
Health care represents 17 percent to 20 percent of the economy and is growing, he said. “We think we get the benefit of the specialization with regard to origination and underwriting knowledge, but we are able to build a diversified business.”