“Prices Tumble For Debt Backing KKR’s $9.9bn Envision Buyout”

Below is an excerpt from the Financial Times

The debt backing KKR’s $9.9bn buyout last year of Envision Healthcare has tumbled in value, reflecting investor fears that greater government scrutiny of US medical billing practices could reduce the company’s revenues.

Fitch, the rating agency, highlighted the concerns this week, placing the company’s $5.4bn loan on its list of “struggling” deals, in another sign of the cracks emerging in the $1.4tn leveraged loan market.

There are now $94.1bn of loans on the Fitch list, up from $74.5bn in July. Envision is the biggest of the 114 loans on the list, which is based on a loan’s rating, its market price and “adverse market information”.

Last year’s deal for Envision — a supplier of medical staff to US hospitals and clinics — was one of the biggest buyouts since the financial crisis, and was criticised by some debt market analysts for a lack of investor protections.

“[Envision] was a very aggressive deal,” said one loan investor. “The deal got done at the top of the market when everyone had money they needed to put to work.”

Envision’s $5.4bn loan maturing in 2025 has fallen from 86.2 cents on the dollar at the start of August to 77.3 cents on the dollar on Wednesday, compared with a decline from 97.1 cents on the dollar to 96.3 cents on the dollar for the broader market. A $1.2bn bond sold by the company dropped from almost 71 cents on the dollar to just over 54.9 cents on the dollar over the same period.

The debt came under pressure after bipartisan support emerged in Congress for bills that would prevent patients from being hit with unexpectedly large charges though a practice known as “surprise billing”.


“If revenues fall for the providers then we could run into a cash flow problem with all of this debt,” said Ron Launsbach, a senior portfolio manager at asset manager Columbia Threadneedle.

Read the full story in the Financial Times.