Lenders To Call for Alliance Medical Sale

LONDON (Reuters) – Alliance Medical’s banks are set to urge it to find a buyer to trump owner Dubai International Capital’s [DUBAHP.UL] (DIC) bid to restructure the business, two sources familiar with the process said.

The senior lenders, which include Lloyds Banking Group (LLOY.L), are likely to send a letter to Alliance Medical and its advisors, saying they are ready to open acquisition talks as early as Tuesday, the sources said.

Should that happen, the company’s board could give the green light to a sale this week, one of the sources said.

DIC — the private equity vehicle of Dubai’s royal family — and junior lenders have tabled a proposal to inject 35 million pounds ($54.58 million) into the company, which provides medical services such as MRI scans and X-rays.

That would enable the company to avoid breaching covenants on an outstanding loan of just under 500 million pounds. But lenders are seeking better terms.

DIC could struggle to recoup its investment in a sale. The business has been valued at no more than 350 million pounds in restructuring negotiations, one of the sources said.

At that level, the equity owners and mezzanine lenders would see their investments wiped out.

“The equity (holders) will want a deal that allows them to extend their period of ownership,” the source said.

DIC — which is part of Dubai Holding — has had to restructure a number of over-indebted companies it owns, including German aluminium business Almatis, a deal that was finalised earlier this month. [ID:nN09212189]

Dubai’s debt crisis meant it has also been struggling under its own debt burden, forcing it to ask creditors for an extension of a $1.25 billion loan maturing in June.

While the letter from senior lenders could open up a sale, it is common for lenders and equity owners to gauge a company’s valuation ahead of a restructuring deal, the source said.

“An element of competitive tension can get the equity providers to sharpen their pencils,” the source said.

DIC acquired Alliance Medical from Bridgepoint [BRDG.UL] at the height of the buyout boom in 2007 for some 600 million pounds. It has since invested some 150 million pounds in developing the business, the source said. Bridgepoint retains a minority stake in the business.

Blackstone is advising Alliance Medical, Deloitte is advising the senior lenders and Houlihan Lokey is advising mezzanine lenders.

DIC, Alliance Medical declined to comment. Bridgepoint was unavailable for comment.

By Sarah White and Simon Meads
(Editing by David Cowell)

($1=.6413 Pound)