Presentation to Vermont Pension Investment Committee
Case Study: Healthcare Receivables Facility
» Transaction Overview
$150 million debt investment backed by
a portfolio of 135,000+ guaranteed
patient healthcare receivables
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The facility attaches at 95% of the
Company's cost basis in receivables
(approximately 83% on the unpaid
principal balance) that are fully
guaranteed to be repaid by investment
grade hospital systems
Structure provided breakeven loss
coverage (to 0% IRR) of 7.3x the base case
cumulative net loss expectation on the
junior debt tranche, providing what we
believe to be ample cushion for volatility
in loss rates in a wind-down scenario
>> Background
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All data as of August 2019 unless otherwise noted. The case study shown illustrates the
most recent healthcare receivables loan facility originated since inception as of May
2021. This case study is shown for illustrative purposes only and there is no guarantee
that Ares will have similar investment opportunities in the future. The underwritten IRR
and MOIC targets do not reflect actual returns to any investor. This information is
neither an offer to sell, nor the solicitation of an offer to hase, any secur the offer
and/or sale of which can only be made by definitive offering documentation.
References to "downside protection", "sufficient diversity" or similar language are not
guarantees against loss of investment capital or value, nor does it assure profit. Please
review in conjunction with the Case Study Endnotes on slide 35.
Confidential - Not for Publication or Distribution
Specialty finance company (the "Company") offering 0% APR financing
solutions to patients for the self-pay portion of their medical bills
through partnerships with hospitals and specialty healthcare providers
The receivables are acquired at a discount and benefit from a full
recourse guaranty back to the healthcare provider who are
predominantly systemically important and investment grade hospital
systems
Financing gap created by traditional bank lenders who are unable to
underwrite companies with complex balance sheets or provide
financing in scales for specialty assets
Structure
Structured as a three year revolving credit facility
Ares structured the facility through a bankruptcy remote financing
vehicle that fully segregated the assets and any related security from
the corporate risk of the originator
Economics:
Loan pricing of L +3.25% subject to a 1.00% floor with (i) a senior
debt tranche that attaches at 71% against the Company's cost
basis in each eligible receivable on a first-out basis and (ii) a
junior debt tranche that advances from 71% to 95% of the
Company's cost basis in each eligible receivable on a last-out
basis
Underwritten to a gross IRR of 10-11% and a gross MOIC of 1.3x (as
of the closing date)
ØARES
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