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Evergreen Physician Group · EVPG

DEMO DATAUNDERWRITING ASSUMPTIONHOLD
Five-minute case summary

Evergreen Physician Group

DEMO DATAUNDERWRITING ASSUMPTION
HOLD
1
The opportunity
Demo purchase of $100M face of First-Lien Term Loan at 93.0 (cash investment $93.5M): current yield 9.2%, yield to maturity 11.5%.
2
The question
Does a 11.5% yield on a rank-1 secured claim compensate for 45% probability-weighted default risk and 35% severe-case loss?
3
The thesis
Margins have declined 150bps in two years and coverage is 1.8x, but the platform is growing and the first-lien loan is trading at a discount. We need to understand organic vs acquired growth and payer-contract exposure before underwriting.
4
The risk (what causes loss)
  • Thin interest coverage: EBITDA / interest 1.83x at FY2025A (EBITDA could fall 45% before coverage hits 1.0x).
  • Refinancing: $900M maturity in FY2029E; only $412M projected liquidity; $488M refinancing requirement.
  • High leverage: net debt / EBITDA 6.2x (maximum in policy 6.0x).
  • Severe case produces a payment default in FY2028E.
5
The protection
  • First-priority secured position on substantially all assets; 0% of recovery value is senior to us and 61% through our tranche.
  • Base-case refinancing tests pass for all 2 maturing tranche(s); 1 are repaid from cash.
  • Discount on first-lien to par
  • Margin recovery as integration completes
6
The base case
Base case (55%): revenue 5.0% in FY2026E, EBITDA margin 13.0%; no default; IRR 11.0%, MOIC 1.34x vs 12% hurdle.
7
The downside
Downside (30%): EBITDA $186M at the trough, peak net leverage 8.1x, covenants breach in FY2026E; default in FY2028E; IRR 10.3%. Severe (15%): default in FY2028E, IRR 2.4%.
8
The recovery
If the company defaults, recovery value is $716M (going concern) in the severe case → 65% recovery (35% LGD) on the target tranche; downside 100%.
9
The decision
HOLD. HOLD (do not size yet): Base-case IRR clears hurdle (11.0% vs ≥ 12.0%); Expected-cash-flow IRR (probability-weighted) clears hurdle (9.5% vs ≥ 12.0%); Net leverage within maximum (6.2x vs ≤ 6.0x).

Generated from the structured model (no free-text generation beyond the analyst’s thesis and risk lists). Hypothetical terms are underwriting assumptions; nothing here is a real transaction.