Golub’s approach gives rise to $1 bln financing with NEA’s Radiology Partners

Sponsors need certainty in today’s hypercompetitive market, and for Golub Capital, delivering certainty comes largely through cementing relationships and the flexibility to craft full financing solutions.

Reflective of that, more than 90 percent of the lender’s 2017 deal volume came from repeat private equity clients. In healthcare, where its portfolio now sits at about $4.14 billion, Golub produced 46 deals in 2017 and half of those were with repeat sponsors.

“From an investor perspective we’re a lender, but I have always thought of us more as an investor,” said Stefano Robertson, who as a managing director out of Golub’s Chicago office heads up the firm’s healthcare-finance group.

“Relationships to us mean we’re playing a long-term game,” Robertson went on. “Not, did we win or lose this one deal.”

Golub’s work with New Enterprise Associates’ Radiology Partners is emblematic of what the firm calls its relationship-lending model.

Over the course of three separate transactions, Golub recently completed $1 billion in financing with Radiology Partners, which NEA formed in November 2012. The company today represents the largest hospital-based radiology practice in the U.S.

Its $1 billion facility consists of a $40 million revolver, $690 million term loan and $270 million delayed-draw term loan. The latter is Golub’s largest DDTL facility to date.

Golub’s initial financing in the company was made in 2014, though Robertson said he started a dialogue with the sponsor a couple years back.

As opposed to taking a transactional-type approach, relying on business-development associates sourcing quality deals, Robertson said that a key element of success has been staying “in the know” with the PE community. That is, maintaining tight relationships with its sponsor clients and being cognizant of what they want to achieve.

A relationship-driven model has also proven valuable in a market that has become increasingly efficient, partly due to bankers running more effective auctions, Robertson said. That has also led to more PE shops wanting to preempt sales processes. For lenders, having already established certainty with a sponsor that wants to act quickly is key, he said.

“Specifically in healthcare, we have to be prepared before a specific company comes to market,” Robertson said. “We have to identify where we want to invest to help us triage potential companies and to help us identify winners and losers.”

That way, Golub is ready when a sponsor wants to submit a detailed purchase agreement ahead of a formal bid date: “There’s no time for a syndication process,” Robertson said. “You need someone who can hold the whole thing.”

Golub, which Robertson said can hold upward of $500 million per deal, was the sole bookrunner for about 60 percent of its deals in 2017 by percentage of dollar held. Golub was the lead lender for about 95 percent of its transactions.

While it would be great to land a $1 billion financing tomorrow, Robertson added, a Radiology Partners-like scenario is preferable: starting with a $150 million transaction and incrementally upsizing the initial loan until it reaches $1 billion.

“Why? As an investor, I’m tasked with putting out new capital, but I’m also tasked with getting that money back. It’s a safer way for us to invest.”

Action Item: Email Golub’s Stefano Robertson at srobertson@golubcapital.com

Photo of Stefano Robertson courtesy of Golub Capital