Yorkville Asset Management has said it recently negotiated and funded a $32 million secured debt facility with investee company Southbridge Health Care LP to help fund the development of five Ontario-based long-term healthcare facilities.
The Toronto-based investment company said that the debt facility will be used as the initial equity to start construction along with an additional $100 million facility from Bank of Montreal.
The secured financing includes a five-year term, matching BMO’s terms, and carries an annual interest rate of 8.5% as well as an initial structuring fee payable to Yorkville Private Lending LP and the Yorkville Long Term Health Care Fund.
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In a statement, Yorkville told investors that it used debt instead of equity in order to protect investor interest and diversify its health care fund’s holdings without impacting ongoing yield. The facility also includes an option to deploy another $50 million or so in future redevelopment projects.
Yorkville also said it has initiated additional governance measures for the Southbridge Health Care GP board as part of its efforts to protect the interest of investors, reduce structural costs and help the business in its redevelopment process. The enhancements were necessary in light of the current environment and the need for a “significant” financial commitment to fund redevelopment, the company said.
“The culmination of this debt facility illustrates how Yorkville continues to provide its clients with unique opportunities, having the ability to negotiate and develop strategies that manage risk while providing a reasonable rate of return,” Ralph Desando, Yorkville’s managing director said in a statement.
“This type of facility is not normally available in these circumstances, and by working with BMO, Southbridge Management, and our respective legal teams, we were able to successfully complete this transaction.”
An initial amount of $22 million was funded immediately, with subsequent draws upon request. Yorkville’s Health Care Fund will use around $10 million of its currently available cash and another $10 million of its revolving credit line with Scotiabank to fund the initial amount, according to a release.
Yorkville manages a number of funds, including a unique Health Care Fund that invests in healthcare-related businesses like long term care, institutional pharmacy and other ancillary health care silos. It recently invested nearly $40 million into CareRX (TSE:CRRX), formerly Centric Health Corporation, a leading Canadian provider of specialty pharmacy services to senior communities, which just completed a $44 million acquisition of specialty pharmacy firm Remedy Holdings Inc.
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