Apollo Global Management LLC (APO.N) is one of the private equity firms that is in talks to acquire assets of heavily indebted U.S. hospital operator Community Health Systems Inc (CYH.N), people familiar with the matter said on Monday.
Community Health Systems, which has a market capitalization of $1.3 billion and total debt of more than $15 billion, said earlier on Monday that it was in the early stages of exploring a variety of options with "financial sponsors," which it did not name, as well as other unspecified alternatives.
Apollo is seeking to add scale to its portfolio company RegionalCare Hospital Partners Inc with more hospitals, the people said. After acquiring it from buyout firm Warburg Pincus LLC last year, Apollo doubled RegionalCare Hospital Partners' size in May with the acquisition of Capella Healthcare Inc.
Some real estate investment trusts have also shown an interest in the assets of Community Health Systems, some of the people said. There is no certainty that any transaction will occur with any party, the people cautioned.
The sources asked not to be identified because negotiations are confidential. Community Health Systems and Apollo declined to comment, while RegionalCare Hospital Partners did not immediately respond to a request for comment.
Based in Franklin, Tennessee, Community Health Systems owns, leases or operates 158 hospitals in 22 U.S. states totaling nearly 27,000 licensed beds.
An asset sale would help the company trim debt after it assumed about $7 billion in debt in 2014 with its acquisition of rival hospital operator Health Management Associates (HMA).
The company's debt woes have been exacerbated by pressure from health insurers and government payors, which have increased scrutiny of short-stay hospital admissions and readmissions.
Community Health Systems has been exploring ways to raise cash. It has said it aims to divest 12 hospitals before year-end, which Fitch Ratings Inc estimates could reduce its debt by $2.3 billion compared to January 2016 levels.
In its first debt repayment since the HMA deal, Community Health Systems paid down about $1.5 billion of debt this year with proceeds from the spin-off of Quorum Health Corp (QHC.N) and the sale of a minority interest in hospitals in Las Vegas.
"While planned asset sales will allow the company to repay debt, the impact on leverage will be limited given the significant amount of debt outstanding and the foregone earnings before interest, taxes, depreciation and amortization," Moody's Investors Service Inc said in a note on Monday.
(Reporting by Carl O'Donnell and Greg Roumeliotis in New York; Editing by Cynthia Osterman)