Healthcare MSO Dividend Recapitalization & Capital Structure Optimization
Return significant capital to private equity LPs and physician rollover shareholders ahead of platform exit: structure senior debt facilities, defend pro-forma adjusted EBITDA, and preserve growth covenants.
As private equity holding periods lengthen in response to macroeconomic interest rate cycles, healthcare sponsors utilize dividend recapitalizations to de-risk investments and return liquidity to Limited Partners (LPs) without triggering a premature platform sale. However, executing a dividend recap on an MSO requires balancing aggressive debt leverage against stringent lender covenants and healthcare regulatory solvency requirements. Kompanie LLP guides PE sponsors in modeling sustainable Debt-to-EBITDA ratios (typically 3.0x to 4.5x), drafting lender-approved Adjusted EBITDA definitions, and aligning physician shareholder distributions.
Deliverables
- Senior Secured Credit Facility (Term Loan A/B and Revolver) negotiation with specialized healthcare lenders.
- Defensible Pro-Forma Adjusted EBITDA reconciliation isolating provider run-rate earnings and tuck-in synergies.
- Physician Rollover Equity cash-out and retention alignment structuring compliant with MSO operating agreements.
- Solvency Opinion defense ensuring transaction withstands fraudulent conveyance scrutiny under corporate laws.
Frequently asked questions
What leverage ratios do healthcare direct lenders allow for MSO dividend recaps?
In the current lending market, senior healthcare lenders generally cap total leverage at 3.5x to 4.5x trailing twelve-month (TTM) Adjusted EBITDA, depending on specialty cash-flow durability (e.g. higher leverage for ophthalmology and dermatology than emergency medicine).
Do rollover physician equity holders participate in dividend recapitalizations?
Yes. Structured properly, dividend recaps provide partial liquidity to both the private equity sponsor and physician equity holders, delivering tangible cash returns that boost morale and strengthen provider retention during years 3 to 5 of the platform.