Century City-based alternative asset heavyweight Ares Management Corp. is reportedly leading a $2.2 billion direct loan to a pharmacy benefits manager — one of the biggest private credit deals of the year.
The loan would help San Diego-based MedImpact Holding Inc. finance its planned purchase of health insurance and healthcare management services company Medical Card System, Inc., Bloomberg reported. The acquisition is being done without private-equity backing, and the second-lien loan could pay at least 8% over the baseline rate, according to PitchBook.
Ares declined to comment on the loan, for which discussions are reportedly ongoing.
Ares shrugs off pressure
News of Ares’ in-progress deal with MedImpact come amid a broader slump in the $1.8 trillion private credit market, which has suffered high investor redemptions and increasing scrutiny over loan quality.Â
Private credit lenders have slowed new originations as concerns mount over their exposure to software companies in artificial intelligence’s wrecking path. In the second quarter, new direct lending loan issuance hit the lowest quarterly volume in three years, totaling $33.6 billion, PitchBook reported.Â
Ares, which manages $671 billion in assets, has felt the impact of troubled investments in companies vulnerable to AI advances but has pressed on, making selective bets in more AI-resilient sectors.
Despite reporting $708 billion in non-accruing loans on its publicly traded investment vehicle, Ares Capital Corp. – a 26% year-over-year increase – the asset manager brought in record fundraising inflows and deployed $35.9 billion in the second quarter. That included $8.2 billion across 69 U.S. direct lending commitments to companies in sectors ranging from refrigeration to aerospace and defense manufacturing.
Loan to support acquisition plans
Ares’ next major loan could go to privately held MedImpact, which borrowed from banks last year to refinance its debt, PitchBook reported. The benefits manager serves more than 20 million customers, including managed care organizations, state and local government entities, hospital systems and self-insured employers, and processes more than $40 billion in pharmacy transactions a year.
The S&P Global last assigned MedImpact a B+ issuer credit rating in late 2023, when it refinanced its capital structure. The credit rating agency, which has since withdrawn the rating, expected the company to use the refinancing to fund “near-term acquisition opportunities,” according to an analyst report.
Since then, MedImpact has folded in a handful of partners, including two risk management firms this March and a smaller benefits manager in February. In early 2024, the company bought Rite Aid’s pharmacy benefits management subsidiary, Elixir Solutions, for $576.5 million in the drugstore chain’s bankruptcy process.
Its next target is San Juan-based Medical Card System, acquired in 2021 by MHH Healthcare, the healthcare investment platform backed by $10 billion private equity firm Kinderhook Industries. As of 2023, the health insurance manager counted 440,000 insured members across Puerto Rico.
