Tue 08/02/2022 16:33 PM
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Oaktree Capital has been buying U.S. Renal Care’s L+500 bps term loan due 2026 and has accumulated a significant position, according to sources.

Market participants are evaluating the possibility of certain lenders to the dialysis provider proposing and executing a transaction that involves funding new money to extend the company’s runway while rolling up their debt holdings that would prime other lenders, known in recent years as creditor-on-creditor violence, the sources said.

The company’s loans and 10.625% unsecured notes due 2027 have dropped in recent months following continuous earnings deterioration due to labor inflation and a slow recovery from low volumes. The term loan was quoted today at 72/73, compared with 90 at the midpoint three months ago, according to a trading desk. The unsecured notes last traded in size at 46 on Friday, July 29, compared with 73 on May 25, according to TRACE.

In addition, the Supreme Court ruled in June that a health plan’s low reimbursement rate for dialysis services does not violate Medicare, dealing a blow to peer DaVita, which also bodes ill for U.S. Renal Care.

House Rep. Yvette Clarke, D-N.Y., introduced a bill on July 29 to “clarify and preserve the breadth of the protections under the Medicare Secondary Payer Act.” The proposal was praised by a kidney care industry group because it would ensure individuals living with end-stage renal disease cannot be discriminated against based on their need for dialysis. DaVita has contributed money to Clarke in 2021 and 2022, according to OpenSecrets.

U.S. Renal Care did not respond to a request for comment. Representatives for the company’s sponsor Bain Capital and Oaktree Capital declined to comment.

--Harvard Zhang
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