Twin Brook invested more than $1bn in healthcare during 2018 – exclusive

The firm doubled its footprint and joins others in making investing in the sector a core strategy.

Twin Brook Capital Partners is on track to be a major player in the healthcare direct lending sector.

The firm has loaned over $2 billion to healthcare-focused mid-market companies since its founding at the end of 2014—$1 billion during 2018 alone. The Chicago-based firm landed more than 30 healthcare transactions over the last year.

Twin Brook lends to sponsored mid-market companies with between $3 million and $50 million in EBITDA. The strategy makes up approximately 30 percent of the firm’s investing portfolio, according to Faraaz Kamran, a partner and head of healthcare leveraged finance for Twin Brook.

“I think healthcare private equity deal volume has continued to be robust the last few years,” Kamran said. “There has been more and more private equity interest in that sector.”

Part of the increased interest in healthcare lending may be due to the scale and fragmentation of the industry which creates enough space for many different firms to participate.

“There is a pathway for portfolio companies to grow,” Kamran said about the sector. “You can be in the mid-market and be the third- or fourth-biggest provider. You don’t have to be a billion-dollar company.”

The political climate and economic market can sometimes slow down the growth of healthcare investing, Kamran said, but looking into 2019 he doesn’t see any of those factors contributing to decrease in growth any time soon.

“A large part of our assets is currently in the healthcare field,” Kamran said. “That will continue. We will continue to be open for business for all deals.”

Twin Brook is just one of the many firms which have found success in healthcare investing and anticipate the market’s growth. Last Thursday, Madison Capital Funding, an investment branch of New York Life Insurance, also announced positive strides in healthcare lending in 2018.

Madison invested over $774 million into healthcare deals in 2018 and has since grown its healthcare assets under management to over $2 billion. Healthcare makes up between 17 to 20 percent of the firm’s portfolio, according to Adam Willis, a managing director and head of healthcare at the firm.

Willis said the firm’s strategy is to invest in companies worth between $3.5 million and $50 million in EBITDA on average. For healthcare, it focuses on companies that reduce costs and improve the quality of care for the healthcare market.

“You continue to see new sponsors looking at healthcare,” Willis said. “There are factors both macro and micro driving the expansion of the healthcare market.” Managers have achieved success in healthcare-focused fundraising this year as well. Both Oberland Capital and Perceptive Advisors hit their respective hard-caps on funds they raised focused on the sector. Varagon Capital Partners also hired a new managing director of healthcare origination in November.

“Every year, I say to myself ‘Healthcare is at an all-time high,’” Willis said, followed by a laugh.