HME: 'recession proof'

Thursday, January 31, 2008

YARMOUTH, Maine - The ongoing credit crunch shouldn't affect the HME industry too much and could actually boost the amount of money flowing in, analysts say.
"There's still a lot of cash sitting around waiting to be deployed by strategic buyers and private equity firms," said Bruce Burns, president of Albuquerque, N.M.-based Affinity Ventures.
Rising numbers of mortgage defaults have triggered a ripple effect across the financial sector, as well as fears of a recession, but bad news for the economy is often good news for health care, which is typically seen as recession-proof, said Bob Leonard, an analyst with Pittsburgh-based The Braff Group.
"It's a double-edged sword," he said. "A lot of money moves to health care when there's a recession."
HMEs could be affected by tighter restrictions on borrowing debt, such as obtaining a line of credit from a bank, said Gina Bienkowski, vice president of Ultimate Resource in Newtown, Pa.
"If there's a credit crunch, the banks' demands will get stronger," said Bienkowski. "For example, instead of having assets (equal to) twice the amount of debt, maybe they will want two-and-a-half times the amount of debt."
Still, with less money floating around the system, credit could get tighter eventually, said industry watchers.
"There's no sign of that at this juncture, but it's a possibility," said Rick Glass, president of Tarpon Springs, Fla.-based Steven Richards & Associates.