S&P gives B+ to Schoen Klinik, loan

S&P said it preliminarily assigned B+ ratings to Schoen Klinik SE and its planned €350 million senior secured term loan B, maturing in 2030. The recovery rating on the loan is 3, indicating meaningful recovery (50%-70%; rounded estimate: 65%) if it defaults. The outlook is stable

“We expect the group's addressable market in Germany (mental health care, somatic care, and rehabilitation) will expand at a compound annual growth rate of 3% between 2022 and 2028 and reach a total size of €155 billion by 2028. The aging population and the increasing focus on mental health care, driven by the Covid-19 pandemic, benefit Schoen Klinik because it has the know-how and ability to scale up and leverage existing platforms. The group also benefits from high referral rates,” S&P said in a press release.

However, “Schoen Klinik lacks the scale of larger operators in the German private hospital market, such as Helios, Asklepios Kliniken GmbH and Sana, and of French peers, such as Ramsay Generale de Sante SA (BB-/stable/--) and Elsan SAS (B+/negative/--). We view the German hospital market as highly fragmented. Schoen Klinik does not only compete against larger private operators but also against not-for-profit and public hospitals, which have a higher percentage of total beds than private operators,” the agency added.

Schoen Klinik will use the loan to repay a portion of its term loan A, real estate loans and promissory notes. S&P said it forecasts leverage will narrow to 5x in 2023 and remain below 5x over 2024-2025, down from a reported 5.2x in December 2022.

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