The uncertainty hanging over Wall Street these days hasn't stopped investors from forming a new commercial finance firm focused on healthcare.
MidCap Financial, based in Bethesda, Md., announced its formation on Monday with more than $500 million in equity commitments, the backing of a billionaire private equity investor and a management team composed of the former senior managers of Merrill Lynch Capital Healthcare Finance.
"Demand for healthcare services is expected to increase markedly as the Baby Boomer generation ages, creating higher demand for the full range of healthcare services," said Howard Widra, the founder of Merrill Lynch's healthcare finance division and former president of GE Healthcare Financial Services who will serve as the new company's CEO. "MidCap opens its doors with substantial capital available to lend into this growing market. Given the limited availability of credit in the middle market generally and in the healthcare industry specifically, we believe we offer a valuable new opportunity for growing and successful healthcare companies to expand their businesses through custom-tailored solutions."
Focused on small and midsized health enterprises, MidCap will invest in four areas:
- real estate loans to senior housing, skilled nursing facilities and medical office buildings;
- working capital loans collateralized by third-party accounts receivable and their assets;
- leveraged loans to healthcare companies backed by private equity sponsors;
- and life sciences loans, primarily to pharmaceutical, biotech and medical device companies.
MidCap's backing comes from Lee Equity Partners, founded by billionaire private equity investor Thomas H. Lee, as well as Genstar Capital and Moelis Capital Partners, the private equity arm of an investment banking boutique run by former UBS investment banker Ken Moelis. The company is also negotiating to receive a $300 million line of credit from Wells Fargo.
"MidCap is one of those businesses that can do well by doing good," offered Lee in a press release distributed by MidCap. "The liquidity crisis in which our nation finds itself has put a significant strain on businesses of all types. Through investment in the healthcare industry, we support both maintenance and improved quality of life. On the investment side, significant opportunities exist for a business with proven management, deep industry contacts and no legacy portfolio."
Merrill Lynch's healthcare unit was sold off to General Electric in February, prior to the company's Wall Street collapse and eventual sale to Bank of America. Joining Widra from that unit as managers in the new venture are Steve Curwin, as chief credit officer; David Moore, as chief financial officer and chief administrative officer; Kevin McWeen, as head of real estate finance; Clare Bailhe, as head of leveraged finance; and Will Gould, as head of life sciences and asset-based lending.
"MidCap's management expertise creates opportunities for lending in niche markets where specialized industry knowledge and experience matter greatly," said Jean-Pierre Conte, chairman and managing director of Genstar Capital. "This transaction provides an opportunity for Genstar to leverage our expertise in the healthcare sector and partner with Howard and his successful team, with whom we have had a strong working relationship and whose executives understand the complexities of lending to middle market healthcare companies to support their growth."
Will MidCap sink or swim in these uncertain times? What factors will contribute to its success or failure? Send your comments to Managing Editor Eric Wicklund at eric.wicklund@medtechpublishing.com.