Brief : Health-care companies are taking on more debt to pay dividends to their private equity owners, just a year after the start of a pandemic that plunged the industry into crisis. At least five U.S. health-care firms have borrowed heavily in part to fund hundreds of millions of dollars of such payouts in the first quarter, according to a report to be released Wednesday by the nonprofit Private Equity Stakeholder Project. The practice, known as dividend recapitalization, is gaining steam as investors hunt for yield with interest rates near historic lows. Meanwhile, health-care companies are on a stronger footing, with patient visits rebounding and the government unleashing unprecedented economic stimulus. Health-care firms have already borrowed about $3.7 billion in 2021, partly to fund payments to private equity owners, more than double the amount issued all of last year, according to data from S&P Global Market Intelligence. At the current pace, it would be the industry’s most active year for borrowing since 2015.
Brief: Blackstone Group Inc. is leading a $100 million funding round in on-demand mental-health company Ginger, accelerating a push into fast-growing technology startups. The funds will come out of the investment firm’s growth equity arm, Blackstone and Ginger said Wednesday. The stake values the San Francisco-based service at about $1 billion, vaulting it to unicorn status. Demand for resources provided by Ginger, which connects users to behavioral health experts and services such as coaching via a mobile app, is surging in the Covid-19 pandemic. The company’s revenue has tripled in the past year. “There’s a widespread prevalence of mental health issues in this country,” said Ram Jagannath, who heads health-care investing for Blackstone Growth Equity. “Like other sectors of health care, the pandemic exacerbated the underlying trends and accelerated people’s adoption of digital platforms.”
Brief: Goldman Sachs told all but critical staff at its operation in Indian IT capital Bengaluru to return to working from home on Wednesday, reversing moves to get staff back to one of its biggest global offices as coronavirus infections in the city grew. India earlier reported a new variant of the coronavirus as new infections and deaths nationwide hit the highest this year, prompting the imposition of new restrictions in some states. Bengaluru reported 1,280 new infections on Tuesday, according to city data, and several sources at Goldman told Reuters that teams had been told to return to working from home ahead of an all-office townhall call at 2 p.m. local time on Thursday. In March so far, nearly 14,000 new cases have been reported, more than twice the number recorded in February.
Brief: The world’s biggest banks cut lending to fossil fuel firms by 9% in 2020 as a result of the pandemic, although funding has still risen over the past five years, a report showed on Wednesday. The 60 largest banks lent more than $750 billion to 2,300 fossil fuel companies in 2020, down from $824 billion in 2019, according to a report by Rainforest Action Network, Reclaim Finance, Oil Change International and other non-governmental organisations (NGOs). But the report said the fall, driven by record low levels of industry investment in the second half of 2020 as the pandemic hammered fuel demand, followed annual rises of 4.4%-5.5% since 2016, the year after the Paris climate accord was signed. It also followed a surge in demand from fossil fuel companies raising cheap financing in the first half of 2020, the report said after assessing the roles of banks in lending and underwriting debt and equity issues.
Brief: Prospects for the recovery of business travel by air are highly uncertain, but it is expected to grow more quickly in developing regions than in advanced economies, said Moody’s Investors Service. “This will continue the trends seen since the global financial crisis, when growth in business travel in advanced economies lagged the overall market, with demand for leisure flying leading. “An increased focus on near-shoring of supply chains after the pandemic is likely to increase intra-regional or short-haul international business travel at the expense of long-haul trips,” the rating agency said in a note today. Moody’s said the recovery in business travel would be driven by the gradual reopening of workplaces and a latent demand to make business trips, although companies’ duty of care to employees to safeguard against Covid-19 infections before vaccinations becoming widespread would partially restrict business travel.
Brief: Dan Zwirn thought markets were frothy for at least five years before the pandemic. His credit shop, Arena Investors, underwrote investments as if a crisis was on its way and diversified so any one deal wouldn’t have an outsize impact on the portfolio. “Frankly a lot of stuff that got hurt was very overdone going into Covid. But people didn’t let us into those clubs in the first place,” Zwirn said in an interview. “There were no 18 percent office loans available, so we were not exposed. That gave a lot of people comfort that this is what the downside looks like.” So far, his approach has worked out, according to the Arena CEO and chief investment officer’s latest letter to clients. “Covid was a great stress-test of our approach, and we were left in a position to quickly shift to playing offense once we had taken stock, battened down the hatches, and appropriately assessed the small impact to our book,” Zwirn wrote in the investor letter.