Citi, BofA, Barclays Win Huge Healthcare Deal

A JER Partners team has tapped Citigroup, Bank of America and Barclays to refinance $1.6 billion of debt on a healthcare portfolio.

The dealers beat out a handful of competing bids by other commercial MBS shops. They will package about $1.5 billion of the new fixed-rate loan into the largest stand-alone healthcare securitization ever. The transaction will hit the market in the first quarter.

JER, a fund shop in McLean, Va., teamed up with Formation Capital of Alpharetta, Ga., to buy Genesis HealthCare in 2007, taking the Kennett Square, Pa., company private. They financed the $2 billion takeover with the $1.6 billion debt package, which was supplied by GE Real Estate and CapitalSource.

That debt, backed by the company's 220 skilled-nursing and assisted-living facilities, doesn't mature until 2014. But the JER team wants to refinance to take advantage of the prevailing rock-bottom interest rates. The Genesis portfolio, encompassing 26,000 beds, is located in the Mid-Atlantic and Northeast.

The largest healthcare loan ever securitized was a $1.2 billion mortgage that Credit Suisse and Morgan Stanley originated in 2006 to finance Fillmore Capital's $2.2 billion acquisition of Beverly Enterprises, a nursing-home operator in Fort Smith, Ark.

Healthcare loans traditionally have accounted for a tiny proportion of CMBS issuance, never exceeding $1.7 billion in a year. No healthcare loans have been securitized since 2007, but CMBS shops are chasing a handful of potential large assignments.

Citi, BofA and Barclays are expected to handle the deal on an agent basis. In other words, they wouldn't fund the loan upfront. Instead, Genesis would get the proceeds when the bond sales close.

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