Covenant Surgical Partners
During the last three years, Iroquois Capital’s investment bankers have worked closely with the management team of Covenant Surgical Partners to plan and execute the right growth capital strategy for this dynamic company.
Covenant Surgical Partners (“CSP”), a Nashville-based operator of single and limited specialty ambulatory surgery centers (“ASC”s), was founded in late 2008. CSP’s operating model is to acquire, own and manage ASCs with physician partners and to deliver quality patient care in an efficient manner. CSP also offers pathology laboratory management services, anesthesia services and a community pain management program on an under-arrangement basis with rural hospitals. By the first quarter of 2013, the Company owned 20 centers with combined revenue of over $100 million.
CSP’s initial funding was $7 million of common stock provided by Iroquois and a founding physician partner. In addition, to the equity, Iroquois identified a $12 million credit facility to supplement the initial funding. In 2009, in order to provide funding for further growth, Iroquois structured and purchased, along with its investing clients, almost $16 million of Series A Redeemable Preferred Stock. The next round of funding took place during 2010, when over $18 million of Series B Convertible Preferred Stock was placed with additional Iroquois clients. Another important step in Covenant’s capitalization took place in mid 2010 with the establishment of a $20 million credit facility.
In August 2011, Iroquois placed $25 million of second lien debt to provide funding for further ASC purchases. Subsequently, Iroquois arranged a $34 million senior credit facility to replace and expand the previous facility.
In the fall of 2012, Covenant’s robust development efforts produced the opportunity to purchase controlling interests in seven very attractive ASCs for closing by the end of the year. The resulting aggregate capital requirement exceeded the Company’s remaining availability under its bank facility. Management and Iroquois determined that the institutional equity market would provide the best alternative for raising the approximately $35-40 million needed within the limited timeframe. Iroquois’ bankers targeted a group of middle market private equity investors who had the necessary healthcare industry experience to appreciate Covenant’s business plan and prospects. Simultaneously with the equity raise, the $34 million bank facility was expanded to $76.5 million in order to accommodate the growth that management foresaw for the next 18-24 months. Both financings — the $40 million in Series C Preferred stock and the increased bank facility – were completed in January 2013.
In 2013, Covenant’s credit facility was again expanded to $95 million to provide additional room for growth.