Debt backing KKR's $9.9B Envision buyout is floundering — Here's why

The debt backing KKR's $9.9 billion Envision Healthcare buyout has dropped in value amid concerns over government scrutiny of medical billing practices, Financial Times reports.

Three insights:

1. Investors seem to fear that the government's heightened concern about "surprise billing" could lower Nashville, Tenn.-based Envision's revenues, according to a Financial Times analysis.

2. In late August, ratings agency Fitch placed KKR's $5.4 billion loan on its list of "struggling" deals. The list takes into account a loan's rating, its market price and adverse market information.

3. Envision's $5.4 billion loan maturing in 2025 dropped from 86.2 cents on the dollar in early August to 77.3 cents on the dollar on Aug. 28.

"If revenues fall for the providers, then we could run into a cash flow problem with all of this debt," Ron Launsbach, a senior portfolio manager at asset manager Columbia Threadneedle, told Financial Times. "Clearly there is uncertainty and that hurts the loan price because there aren't many people wanting to buy the debt."

Click here for the full Financial Times report. 

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