The full breadth of health care reform has yet to be felt, but GE Capital Healthcare Financial Services is reaping the benefits. The Bethesda-based speciality finance firm is witnessing an upturn in business that has it on track to surpass its 2010 lending activity by roughly 15 percent.
“Health care has seen a lot of activity, given some of the expectations around reform and changes to the health care system,” said President and CEO Darren Alcus. “You’ve seen a lot of consolidation, companies growing organically — some in preparation for anticipated changes to the system, others defensibly.”
Through the first nine months of the year, the company, which provides financing to some 40 sectors of the health care industry, deployed more than $5 billion in loans.
The health care lender is one of 13 branches on the GE Capital Americas tree, which is one of seven parts of GE Capital, the financial wing of conglomerate General Electric. The parent credited its capital arm with boosting earnings 79 percent to $1.47 billion in the most recent quarter. GE Capital had tapped the federal government’s Temporary Liquidity Guarantee Program at the height of the financial crisis. Now the success of its branches such as health care is driving a turnaround.
In the nine years that GE Capital Healthcare Financial has been in operation, the company has provided more than $60 billion in financing to health-related companies. The company, with a staff of 220, hired 30 new people in the past year, mainly in loan originations. Nearly 40 percent of its staff is located in Bethesda, with the remainder scattered throughout its offices in Chicago, New York, Los Angeles, Atlanta and Norwalk, Conn.
The firm’s primary business lines are corporate finance, commercial real estate and life sciences. GE Capital Healthcare Financial routinely records the most activity in its corporate finance segment, through which it funds the operations of health care companies. Roughly 76 percent of the deals it logged through September fell into that category, Alcus said.
“We have a broad product offering in corporate finance — cash flow loans, asset-base loans, restructuring and turnaround financing — and that tends to be the most active segment because of all of the different front-end possibilities,” he said.
Among the 130 transactions the firm closed through the third quarter was a $115 million senior secured credit facility for Evolution1, an electronic health care reimbursement company, in August. A month prior to that, the lender secured $78 million in senior secured credit facilities for JHP Pharmaceuticals, which develops, manufactures and markets brand and generic drugs.
The pace of health care transactions slowed in the wake of the recession and the uncertainty surrounding the sector prior to the federal passage of reform legislation, according to Deloitte. The appetite for deals has since rebounded.
Alcus hopes to grow all of the company’s service lines, but he has a keen focus on expanding its lending to long-term care facilities. “The demographics facing that business are tremendous,” he said. “There is something like 30 million seniors in this country over 70 years of age. There will continue to be tremendous demand for health care facilities to serve the aging population.”