Without a solution to some of the industrywide setbacks, KBRA believes that health care practice roll-ups—with their $45 billion in total debt—could be an outsized contributor to the higher direct lending default rate we anticipated this year (see Private Credit: 2025 Outlook). Health care roll-up platforms have long attracted investors eager to capitalize on the noncyclical nature of the health care industry and the aging population in the U.S.; however, a combination of factors has recently exposed the fragility of the model.
In this KBRA report, we unpack the challenges faced by the subsector and assess whether these headwinds could continue the trend of lower recoveries observed in the bankruptcy processes for health care roll-ups in 2024.
Key Takeaways
- In our assessment portfolio, health care roll-ups’ credit quality ranked among the worst at the median. This subsector had…