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Great Point returns more cash to LPs through HSI dividend recap

2 Jan 2013

hsi_sqGreat Point Partners has secured a dividend recapitalisation for portfolio company Health Systems International (HSI), a move that will return yet more cash to the US healthcare-focused private equity firm’s investors as it raises its latest fund.

Although financial terms of the recapitalisation were not disclosed, GPP said it would generate a significant return for HSI Management and GPP I’s limited partners’ investment in the company.

The firm also said that after taking the recapitalisation into account, HSI still possesses ample borrowing capacity and will continue to pursue acquisition opportunities in 2013.

HSI, which provides outsourced medical cost management systems to healthcare payors and provider networks, received its first investment from GPP in 2007.

The move comes just five months after the Greenwich, Connecticut-based firm made a 3.4-times return on its most recent sale of biotechnology company Caprion Proteomics, which was bought by Chicago Growth Partners over the summer.

Both transactions will help return cash to GPP’s LPs as it looks to secure commitments for its second fund, which had raised $75m of its $200m target as of October last year, according to an SEC filing.

Great Point Partners II will invest in pharmaceuticals, healthcare, medical instruments, medical devices and healthcare IT companies.

The vehicle is being placed by Wedge Alternatives and has a hard cap of $250m.

GPP typically makes investments in the region of $7m to $25m, although can invest amounts of more than $50m in co-investment situations with its limited partners.

The firm, which has more than $400m of equity capital under management, trounced its $100m target for its inaugural fund, which closed in 2006 with commitments of $156m from investors including North Carolina-based alternatives investor Hatteras.

In contrast to the dearth of debt-fueled dividend recapitalisations in Europe, private equity-backed companies in the US had launched at least 35 such payouts worth over $11bn by July last year, according to a recent report by credit ratings agency Moody’s.

US speculative-grade companies increased dividend payouts by more than 10 per cent in 2011 and the first quarter of 2012 as private equity sponsors sought to extract returns from sponsored companies.

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