Comments on: HCIT from the Investor’s Chair 2/26/10 http://histalk2.com/2010/02/26/hcit-from-the-investors-chair-22610/ Healthcare IT News and Opinion Thu, 09 Feb 2012 04:50:12 +0000 hourly 1 http://wordpress.org/?v=3.3 By: adam http://histalk2.com/2010/02/26/hcit-from-the-investors-chair-22610/comment-page-1/#comment-8159 adam Sat, 27 Feb 2010 18:24:29 +0000 http://histalk2.com/2010/02/26/hcit-from-the-investors-chair-22610/#comment-8159 Ben: I remember way back when you were a HCIT analyst, when MDRX and QSII were $80 million companies. It's been quite some time since we've had large deals in this space, the last being IDX. Seems to me that the big boys (ie, IBM, Oracle, MSFT, GE, MCK) really missed a gigantic opportunity to pick up HCIT assets for reasonable valuations in 2008 and 2009. Of course, these guys typically wait for prices to skyrocket before making a move. Do you foresee either sector consolidation or large cap acquisition of smaller HCIT assets? CPSI and ATHN have taken some lumps recently. Could the depressed prices draw some interest? Ben: I remember way back when you were a HCIT analyst, when MDRX and QSII were $80 million companies. It’s been quite some time since we’ve had large deals in this space, the last being IDX. Seems to me that the big boys (ie, IBM, Oracle, MSFT, GE, MCK) really missed a gigantic opportunity to pick up HCIT assets for reasonable valuations in 2008 and 2009. Of course, these guys typically wait for prices to skyrocket before making a move. Do you foresee either sector consolidation or large cap acquisition of smaller HCIT assets?

CPSI and ATHN have taken some lumps recently. Could the depressed prices draw some interest?

]]> By: NotQuite http://histalk2.com/2010/02/26/hcit-from-the-investors-chair-22610/comment-page-1/#comment-8158 NotQuite Sat, 27 Feb 2010 13:59:05 +0000 http://histalk2.com/2010/02/26/hcit-from-the-investors-chair-22610/#comment-8158 Rob, if you look at Spheris' debt, $125 million is unsecured, while $75 million is secured. Generally, unsecured debt is held by the banks and not sold to investors.. Basically, Spheris was sold for enough money to barely pay off the secured debt. That transaction will hurt some banks pretty badly. There are many deals like this Spheris that banks still have on their books. It's a significant problem. Rob, if you look at Spheris’ debt, $125 million is unsecured, while $75 million is secured. Generally, unsecured debt is held by the banks and not sold to investors.. Basically, Spheris was sold for enough money to barely pay off the secured debt. That transaction will hurt some banks pretty badly. There are many deals like this Spheris that banks still have on their books. It’s a significant problem.

]]> By: Lazlo Hollyfeld http://histalk2.com/2010/02/26/hcit-from-the-investors-chair-22610/comment-page-1/#comment-8157 Lazlo Hollyfeld Sat, 27 Feb 2010 05:55:41 +0000 http://histalk2.com/2010/02/26/hcit-from-the-investors-chair-22610/#comment-8157 CDOs - Financial firms turning someone's trash into fool's gold. CDOs – Financial firms turning someone’s trash into fool’s gold.

]]> By: Rob Hart http://histalk2.com/2010/02/26/hcit-from-the-investors-chair-22610/comment-page-1/#comment-8156 Rob Hart Sat, 27 Feb 2010 04:25:48 +0000 http://histalk2.com/2010/02/26/hcit-from-the-investors-chair-22610/#comment-8156 Leverage might be creeping back up but generally its limited to about 2X EBITDA. By contrast, VWR was leveraged about 11X EBITDA at the height of the boom. Because the banks charged fees of several percent on loans that could be measured in the billions, it was amazingly lucrative and competitive business, creating a race to the bottom for the banks. Most of this debt was then sold to investors in the form of bonds or CDOs so I am not sure how much debt is constraining their current lending as is the fact that there is nobody willing to offload it to. Ultimately this debt lived up to its old name - "junk bonds" but in the 2000's it had a more enticing name - "high yield" debt and there were lots of willing buyers. Leverage might be creeping back up but generally its limited to about 2X EBITDA. By contrast, VWR was leveraged about 11X EBITDA at the height of the boom. Because the banks charged fees of several percent on loans that could be measured in the billions, it was amazingly lucrative and competitive business, creating a race to the bottom for the banks. Most of this debt was then sold to investors in the form of bonds or CDOs so I am not sure how much debt is constraining their current lending as is the fact that there is nobody willing to offload it to. Ultimately this debt lived up to its old name – “junk bonds” but in the 2000′s it had a more enticing name – “high yield” debt and there were lots of willing buyers.

]]> By: NotQuite http://histalk2.com/2010/02/26/hcit-from-the-investors-chair-22610/comment-page-1/#comment-8155 NotQuite Sat, 27 Feb 2010 02:58:35 +0000 http://histalk2.com/2010/02/26/hcit-from-the-investors-chair-22610/#comment-8155 The Private Equity firms' use of leveraged buy-outs is one of the sources of the current banking problems. Look at the situation at Spheris. The private equity company, Warburg Pincus, bought Spheris using over $200 million of debt. Now Spheris is bankrupt, and being sold for about $75 million. As a result, the banks will lose at least $125 million, and possibly more. Warburg Pincus will lose about $20 milliion by comparison. No wonder banks aren't making any loans. Their existing loans through private equity firms are killing them. The Private Equity firms’ use of leveraged buy-outs is one of the sources of the current banking problems. Look at the situation at Spheris. The private equity company, Warburg Pincus, bought Spheris using over $200 million of debt. Now Spheris is bankrupt, and being sold for about $75 million.

As a result, the banks will lose at least $125 million, and possibly more. Warburg Pincus will lose about $20 milliion by comparison.

No wonder banks aren’t making any loans. Their existing loans through private equity firms are killing them.

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