Tuesday 03 May 2016 by FIIG Research Company updates

Capitol Health Limited successfully closes $50m fixed rate bond issue


Capitol Health Limited (Capitol) operates in the defensive healthcare sector, providing community based (non-hospital/non-aligned) medical diagnostic imaging (DI) services, such as ultrasounds and MRI’s. Capitol has successfully closed $50m in senior unsecured notes to refinance their existing senior secured debt and general corporate purposes. The Notes offer a fixed return (paid semi-annually) of 8.25% p.a. for four years, callable at the company’s option after year two at a sliding premium to par


The issuer

Capitol Treasury Pty Ltd (the “Issuer”) is a wholly owned subsidiary of Capitol Health Limited (“Capitol”). Capitol operates in the defensive healthcare sector, providing community based (non-hospital/non-aligned) medical diagnostic imaging (DI) services, such as MRI’s. Capitol listed on the ASX in 2006 and has a current market capitalisation of $94m as at 20 April 2016.

Capitol is a large community based DI provider that operates through approximately 70 imaging clinics across Victoria and NSW.

The long term dynamics for the DI sector are strong, underpinned by a move to evidenced based preventative health care, for an increasingly aging population:

FY15 revenue and underlying EBITDA was $111.2m and $22.2m respectively. Based on Bloomberg equity consensus forecasts, FY16 revenue and EBITDA is estimated to increase to $154.0m and $22.9m respectively, translating to a forecast Net Debt / EBITDA of 3.7x at 30 June 2016.

The industry has relatively high barriers to entry largely driven by the capital costs required to establish a new business along with a limited number of MRI licences available to receive the full Medicare rebate.

In FY15, approximately 80% of Capitol’s revenue was derived from Medicare rebates. There is a reliance on the government policy, which is balanced against providing broad access to services and supporting an ageing population.

The offer

Capitol Treasury Pty Ltd (ACN 611 139 194) successfully closed $50,000,000 Senior Unsecured Australian Dollar Fixed Rate Notes (“Notes”), guaranteed by its parent Capitol Health Limited (“Capitol”) (ABN 84 117 391 812), and certain Australian subsidiaries of Capitol.

On 28 April 2016, Capitol successfully closed the issue of a four year, fixed rate, senior unsecured and unsubordinated note issue ("Notes") with a fixed interest rate of 8.25% per annum, payable semi-annually in arrears.  Notes will issue on 10 May 2016.

FIIG was the Co-Manager for this transaction and the Notes are available to wholesale clients only (pursuant to the Corporations Act 2001 (Cth)), with an initial minimum subscription of A$50,000 and in increments of A$1,000 thereafter.

For more information

See the Final Information MemorandumExternal link - opens in a new window dated 28 April 2016, which is subject to completion, includes the terms and conditions of the Notes. A summary of the Notes is included below in "Notes summary" and a Research ReportExternal link - opens in a new window has also been made available.

Notes summary:

  • The Notes have a 4 year maturity with interest paid semi-annually in arrears
  • The Notes will pay a fixed rate of interest of 8.25% pa
  • The Notes rank as senior unsecured obligations of the Issuer
  • Investors have a put option at 101% upon a Change of Control Event of the Issuer
  • The Issuer may call some or all of the Notes prior the Maturity after 2 years at $103; two and a half years at $102; three years at $101; and three and a half years at $100.50
  • The Notes benefit from a covenant package that, amongst others, limits the total amount of debt the Group can obtain as detailed in the Preliminary IM
  • The Notes will not be made available to retail investors and will not be seasoned
  • The Notes are not listed on an exchange or rated by a Ratings Agency

To transact in the secondary market after 10 May 2016 contact your FIIG Representative or phone 1800 01 01 81.


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