Team Health’s capital structure gained several points this week after the physician staffing company disclosed a robust liquidity position – thanks to injections from both its sponsor and the federal government – despite reporting negative EBITDA for 2Q20, according to four sources familiar with the company.
Management provided additional details on the previously reported capital injection from sponsor Blackstone, which funded a USD 45m PIK loan during the quarter to fund interest payments and legislative advocacy costs, the sources said. The company received an additional USD 13m under the loan after the quarter ended, three of the sources added.
Team Health has also obtained USD 56.7m in federal stimulus funding, the sources said.
“The Blackstone money shows the government and debtholders that the CARES Act money will go to fund operations, whereas the Blackstone loan will take care of the debt service,” one of the sources said.
As of 30 June, the company had roughly USD 700m of cash and a fully tapped revolver. Management expects additional liquidity from federal stimulus in 3Q20, two of the sources said.
The company’s USD 2.75bn Libor+ 275bps (1% floor) term loan due 2024 is currently quoted in the 83.375/84.875 context, up from the 80.688/82.563 context on 11 August before the earnings report, according to Markit.
Its USD 865m 6.375% senior unsecured notes due 2025 changed hands at 63.5 for a 18.816% yield on 12 August after the report, up from 58.8 on 11 August, according to MarketAxess. The notes continued to rise to trade at 66 to yield 17.731% today.
For 2Q20, Team Health’s revenue came in at USD 934m without the CARES Act grant, down 22% year-over-year, three of the sources said. Including the money from the CARES Act grant, revenue totaled USD 991m, down 17.5% year-over-year, the sources added.
EBITDA for the quarter totaled negative USD 1.5m, three of the sources said. One of the sources backed out USD 56.7m of federal stimulus money and calculated negative USD 58.7m EBITDA.
Total leverage comes to 9x through USD 3.95bn in total debt and USD 438m of LTM adjusted EBITDA, including USD 174.3m of COVID-19 addbacks. Meanwhile, net leverage totals 7.4x factoring in the cash balance.
Without the USD 56.7m of federal stimulus and USD 174.3m in COVID-19 addbacks, the company’s TTM EBITDA is USD 201.9m, one of the sources added.
Team and Blackstone did not respond to requests for comment.