Zarriello Is Brought Aboard to Lead Distressed Credit Team at Cain Bros.

Health care investment banking shop Cain Brothers has hired a senior banker to help lead its distressed credit team.

Michael Zarriello joins Cain Brothers in its San Francisco office as a managing director, focusing on providing distressed credit advisory services for tax-exempt debt issuers and lenders for long-term care and acute-care provider clients.

He will assist boards, management teams, financial sponsors, and creditor groups to coordinate distressed credit solutions between borrowers and lenders, according to the firm.

“Cain Brothers’ expertise in the senior-living, acute-care hospital and related health care services sectors brings an important understanding and perspective in developing distressed credit solutions,” Zarriello said.

“The objective on each assignment is to reach a consensual solution, sustain the viability of operations, and enhance creditors’ recoveries in the event of a sale or liquidation.”

Zarriello, who will lead the team with Jason Horowitz, most recently served as executive director and co-head of health care at Capstone Advisory Group, where he advised debt restructuring and advisory services.

Zarriello has also worked at MTS Health Partners, Jesup & Lamont and Bear Stearns.

“Considering today’s challenging national economic environment, volatile capital markets, and the myriad changes stemming from health care reform, our distressed credit team will be able to assist debtors and creditors in developing workable financial solutions,” Robert Fraiman, Cain Brothers president and chief executive officer, said in a statement.

Indeed, the health care sector is facing an uphill battle.

Last week, Moody’s Investors Service issued a report saying the next three to four years will see increased revenue pressure that will drive consolidation in the nonprofit hospital sector.

While hospital consolidation is a credit-positive — mergers or acquisitions can lead to debt repayment or guarantees by higher-rated systems — credit deterioration can result if mergers fail, Moody’s noted.

Cuts in Medicare and Medicaid, along with lower patient volumes and a weakened payer mix, have contributed to the lowest hospital revenue growth rates in over a decade, putting further pressure on the health care sector.

Earlier this week, Fitch Ratings analysts said health care costs present the biggest challenge for states seeking budget balance.

“A major concern for states is the effect of federal action on Medicaid, as it relates to both current federal spending-cut discussions and the implementation of the 2010 health care reform bill,” said Olu Sonola, director in the credit policy group at Fitch.

“Federal funding cuts not offset by reduced federal requirement would have a direct effect on states, possibly indirectly affecting some state economies,” Sonola added.

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Healthcare industry
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