Unitranche Financing for a Healthcare Services Platform

Deal Overview

Our borrower was a sponsor-backed outpatient healthcare services platform with stable reimbursement, diversified geography, and a clear pipeline of tuck-in acquisitions. The sponsor sought a single-lender solution to refinance existing debt and fund a three-year roll‑up plan.

• EBITDA at close: ~$35M, with 70%+ conversion to cash.
• Low cyclicality and strong payer mix with limited single-payer concentration.
• Sponsor with a 10+ year track record in healthcare services.

Capital Structure & Key Terms

We provided a unitranche facility that combined senior and junior risk into a single tranche, simplifying documentation and execution for the sponsor while preserving strong creditor protections.

• Closing leverage: 4.0x net debt / EBITDA, with a hard cap at 4.75x including DDTL usage.
• Cash-pay coupon with modest PIK toggle if leverage exceeded pre‑defined thresholds.
• Delayed-draw tranche sized to fully fund the acquisition pipeline, subject to strict underwriting and minimum performance tests.
• Amortization via excess cash flow sweeps above a conservative fixed-charge coverage level.

Downside Protection

The core of the underwriting was not the base case IRR, but the question: “What happens if the roll‑up stalls after year one?” We underwrote to a no‑M&A scenario, stress-tested reimbursement risk, and sized leverage against recurring earnings only.

• Maintenance covenants on leverage and fixed charge coverage, with step‑downs tied to acquisition integration milestones.
• Tight baskets around additional indebtedness, distributions, and acquisitions outside the defined healthcare sub‑sectors.
• Robust security package including first-priority liens on all material entities, receivables, and IP.
• Board observation rights and monthly KPI reporting on same‑store volumes, reimbursement trends, and integration progress.

Outcome & Lessons

Within two years of closing, the sponsor completed seven tuck‑in acquisitions, while leverage remained below the underwritten ceiling. The facility refinanced inside of year four, generating an attractive risk‑adjusted return with limited mark‑to‑market volatility.

The key lesson for our team was that disciplined unitranche structures in non‑cyclical sectors can offer equity‑like upside with credit‑style downside, provided that delayed‑draw capital is tightly controlled and covenants are aligned with real integration risk rather than a simple leverage grid.