Debt-funded dividend paid to Help at Home owners one year after state closure

Home care services provider Help at Home has paid its private equity owners a $262.6 million debt-funded dividend, just one year after the company shuttered operations in the entire state of Alabama due to purported cost concerns.

This September, Help at Home’s owners – which include Centerbridge Partners, Vistria Group, and Wellspring Capital Partners – added $1.5 billion in debt to the company’s balance sheet, which will be used to repay existing debt, to fund a dividend payment to Help at Home’s owners, and to cover related fees and expenses.[1]

In total, the company’s owners will receive a $262.6 million payment, or 17.5% of the new debt’s proceeds, in what is known as a dividend recapitalization: a common private equity tactic where companies issue debt and use a portion of the proceeds to pay a dividend to the owners.[2]

Dividend recapitalizations have taken off in 2024, with an estimated $30.2 billion in debt used to fund dividend payments to owners as of June. The practice, which returns cash to investors, typically does not fuel a company’s growth – and can actually signal that a private equity firm is struggling to generate returns promised to investors.[3]

One year earlier, in September 2023, Help at Home announced that at the end of the month it would pull its services entirely out of Alabama, laying off 785 employees across every county in the state.[4]  The departure left state agencies scrambling on short notice to find replacement caregivers for 1,100 older and disabled adults.[5]

According to a company spokesperson, Help at Home’s decision to leave Alabama was in part due to the state’s inaction to expand Medicaid.[6] Ten states have not adopted the Affordable Care Act’s (ACA) Medicaid expansion, including three states – Mississippi, Georgia, and Florida[7] – where Help at Home still provides services.[8]

Help at Home has been owned by Centerbridge Partners and the Vistria Group since October 2020, when they took majority ownership of the company from Wellspring Capital, which had acquired Help at Home in 2015 and retained a minority stake as part of the deal.[9]

In a previous blog post discussing the Alabama departure, PESP noted that Centerbridge and Vistria partially funded the acquisition of Help at Home by placing $745 million in debt onto the company’s balance sheet, and the company later took on more debt to fund its acquisition-based growth.[10]

Help at Home faces continued risk due to how its owners use the company to take on debt. Moody’s noted that “Help at Home’s high financial leverage and propensity for acquisitions and shareholder distributions leave it exposed to governance risks.”[11]

S&P Global gave moderately negative consideration to the company’s governance – and commented on private equity ownership in general – stating that Help at Home’s high debt levels reflect “corporate decision-making that prioritizes the interests of controlling owners, in line with our view of most rated entities owned by private-equity sponsors.”[12]

Resources

[1] Moody’s Investors Service. “Moody’s Ratings Affirms HAH Group Holding’s B2 CFR, Assigns B2 Ratings to Proposed Senior Secured Debts; Outlook Stable,” September 10, 2024. https://www.moodys.com/research/Moodys-Ratings-affirms-HAH-Group-Holdings-B2-CFR-assigns-B2-Rating-Action–PR_492715.

[2] Kate Marino. “Another Sign of Investor Optimism: Dividend Recaps Are Back.” Axios, January 29, 2024. https://www.axios.com/2024/01/29/private-equity-dividend-recap.

[3] Sonali Basak and John Sage. “Private Equity Won’t Stop Gorging on Debt to Pay Investors.” Bloomberg.com, June 17, 2024. https://www.bloomberg.com/news/articles/2024-06-17/private-equity-taps-leveraged-loans-to-pay-investors-in-dividend-recap.

[4] Hannah Denham. “Help at Home to Lay off 785 Workers and Leave Alabama, Blaming State’s Medicaid Policies.” AL.com, September 15, 2023. https://www.al.com/news/2023/09/help-at-home-to-lay-off-785-workers-and-leave-alabama-blaming-states-medicaid-policies.html.

[5] Anna Claire Vollers. “Private Equity’s Growing Footprint in Home Health Care Draws Scrutiny.” Stateline, January 31, 2024. https://stateline.org/2024/01/31/private-equitys-growing-footprint-in-home-health-care-draws-scrutiny/.

[6] Hannah Denham. “Help at Home to Lay off 785 Workers and Leave Alabama, Blaming State’s Medicaid Policies.” AL.com, September 15, 2023. https://www.al.com/news/2023/09/help-at-home-to-lay-off-785-workers-and-leave-alabama-blaming-states-medicaid-policies.html.

[7] KFF. “Status of State Medicaid Expansion Decisions: Interactive Map,” May 8, 2024. https://www.kff.org/affordable-care-act/issue-brief/status-of-state-medicaid-expansion-decisions-interactive-map/.

[8] Help at Home. “Location Finder.” Accessed September 18, 2024. https://www.helpathome.com/location-finder/.

[9] PR Newswire. “Help at Home Acquired by Centerbridge Partners and The Vistria Group From Wellspring,” October 30, 2020. https://www.prnewswire.com/news-releases/help-at-home-acquired-by-centerbridge-partners-and-the-vistria-group-from-wellspring-301163971.html; Wellspring Capital. “Help at Home.” Accessed September 18, 2024. https://www.wellspringcapital.com/project/help-at-home/.

[10] Michael Fenne. “PE-Owned Home Health Company Terminates Operations in Alabama.” Private Equity Stakeholder Project PESP, September 21, 2023. https://pestakeholder.org/news/pe-owned-home-health-company-terminates-operations-in-alabama/.

[11] Moody’s Investors Service. “Moody’s Ratings Affirms HAH Group Holding’s B2 CFR, Assigns B2 Ratings to Proposed Senior Secured Debts; Outlook Stable,” September 10, 2024. https://www.moodys.com/research/Moodys-Ratings-affirms-HAH-Group-Holdings-B2-CFR-assigns-B2-Rating-Action–PR_492715.

[12] S&P Global Ratings. “HAH Group Holding Co. LLC ‘B-’ Rating Affirmed On Refinancing And Sponsor Dividend; Outlook Stable; New Debt Rated,” September 10, 2024. https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3247866.