Report: CVC-backed I-Med proposes restructure

CVC Asia Pacific-backed diagnostic imaging business I-Med is reportedly poised to submit a restructuring proposal to its creditors in a bid to alleviate mounting pressure to repay over A$1.2 billion in senior and subordinate debt, according to the Sydney Morning Herald.

Should the proposal be accepted, senior debt worth about A$890million would be converted to equity, the daily said without citing sources. It is unclear what would happen to the estimated A$340 million owed to subordinated debt holders as neither CVC nor I-Med could be reached for comment.

I-Med operates more than 220 diagnostic imaging clinics in Australia as well as I-TeleRAD, a teleradiology reporting service.

CVC acquired I-Med when it paid roughly A$2.7 billion for its parent company DCA in 2006. The figure represented almost 12 times the company’s EBITDA for the year ended 2006. The private equity firm subsequently sold the aged-care arm of the company to UK trade buyer BUPA in 2007 for A$1.225 billion.

In 2009, CVC placed the company’s oncology and cardiology diagnostics business up for sale in a transaction reportedly worth up to A$210 million, a source told PE Asia then.

Since then the company’s performance had continued to flounder under regulatory changes and mounting competition within Australia’s diagnostics sector, said Mark Masterson, chief executive of I-Med on CVC’s website.

The proposal to convert debt into equity is reminiscent of the firm’s investment in Stella Travel Services- the travel business of the Stella Group. The group was broken into its travel and hospitality operations – known as Stella Hospitality Group – in August 2009, after falling into financial trouble.

CVC first bought a 65 percent stake in Stella Group for A$400 million from Octaviar, then known as MFS Limited, in 2008. The firm reportedly inherited A$905 million in debt from that deal. Then in July 2009, the pan-Asian buyout firm acquired the rest of the business at a fraction of the price, according to Australian media reports.

As part of Stella Group's recapitalisation, Swiss bank UBS converted a reported A$575 million worth of debt into equity, giving it a stake of about 40 percent in the business. CVC Asia Pacific continued to remain the group’s largest stakeholder.

In May last year, Stella Travel Services and Qantas-owned Jetset Travelworld combined their businesses in a merger which saw CVC retain a 27 percent stake in the merged entity.

Other private equity-backed Australian assets which have fared poorly in recent months include Affinity Equity Partners-backed clothiers Colorado Group and Pacific Equity Partner’s RedGroup.