UPDATE: Leonard Green-led ownership collected $658 million from safety-net hospital company despite challenges, commitment to regulators to forgo dividends

Private equity firm Leonard Green & Partners owns safety net hospital chain Prospect Medical Holdings. The Leonard Green-led ownership group has drawn $658 million dollars in fees and dividends from Prospect Medical Holdings even as the hospitals suffered operating challenges, substantially underfunded pensions, and regulatory scrutiny.

See out latest report: “UPDATE: Leonard Green-led ownership collected $658 million from safety-net hospital company despite challenges, commitment to regulators to forgo dividends.”

Key Findings:

The Leonard Green-led ownership group has drawn $658 million dollars in fees and dividends from Prospect Medical Holdings.

Prospect’s $457 million debt-financed dividend in 2018 contradicted a commitment it made to state regulators in Rhode Island four years earlier to not pay any more dividends to the owners.

The fees and dividends were collected despite Prospect’s declining financial performance.

Between 2015 and 2018:

• Prospect’s EBITDA declined from $142 million in 2015 to $17 million in 2018—an 88% decrease.
• Prospect’s EBITDA margin shrank from 10.8% to 0.6%.
• Cash on hand declined from $65.9 million to just $7.7 million.
• As of September 2018, Prospect faced $260 million in unfunded retirement benefit obligations.
• Between 2016 and 2018, the funded ratio of the Prospect’s pension funds fell from 68.3% funded to 60.7% funded.

This report is an update to out January 2020 report: “Raiding the Safety Net: Leonard Green & Partners Seeks to Walk Away from Prospect Medical Holdings after Collecting $570 Million in Fees and Dividends.”

Prospect’s recent financial statements are here: 2017-2018, 2016-2017, 2015-2016