UPDATE 2-KKR-led consortium invests $685 mln in Philippines' top hospital chain

* Bulk of investment in mandatory exchangeable bonds
* Consortium consists of KKR and GIC
* Temasek, CVC had been among bidders for hospital
group-sources

(Recasts and writes through)
By Neil Jerome Morales and Anshuman Daga
MANILA/SINGAPORE, Oct 15 (Reuters) - A KKR-led KKR.N
consortium said it will invest $685 million in the largest
hospital group in the Philippines, seeking to capitalise on
growing demand for private healthcare in Southeast Asia.
Under the deal, KKR and partner Singapore sovereign wealth
fund GIC will spend $100 million to gain 6.25% of Metro Pacific
Investments Corp's MPI.PS hospital business, with the
remainder invested in mandatory exchangeable bonds.
The bonds will give the consortium the right to swap the
bonds for shares either at the time of an IPO or in 10 years,
whichever is sooner.
Bankers said the deal was one of the biggest equity
investments by a private equity group in Southeast Asia.
As part of the transaction, GIC will restructure its current
investment in the business and reinvest alongside KKR.
Once the bonds are converted and GIC's existing 14% stake is
accounted for, the consortium will own the equivalent of 80% of
the company's shares, Metro Pacific's Chief Financial Officer
David Nicol said. But Metro Pacific will retain control of the
business by virtue of voting rights attached to the preferred
shares it owns, he added.
A planned IPO for the business, Metro Pacific Hospital
Holdings, has been postponed as a result of the deal.
Singapore state fund Temasek and buyout firm CVC had also
been in the running to buy into the hospital group, sources
familiar with the matter had said previously.
"The Philippines has a very, very young population and as
they grow, the rising disposable income is growing so fast that
more and more people in the middle class are demanding private
healthcare," Ashish Shastry, KKR's co-head of Asia Pacific
Private Equity, told Reuters.
He added that KKR could use its experience in healthcare
businesses in China, India and the United States to help the
hospital group.
The funds will enable the unit to hit its new target of
expanding to 30 hospitals with 5,000 beds before 2030, Augusto
Palisoc, president of the healthcare group, said in a statement.
It currently has 14 hospitals and around 3,200 beds.
Metro Pacific, which has interests in power, water and other
sectors, is a unit of First Pacific Co Ltd 0142.HK , which is
owned by Indonesian tycoon Anthoni Salim.
Bank of America Merrill Lynch and UBS were the financial
advisors to Metro Pacific and GIC on the deal, which is expected
to close by the year-end.
($1 = 51.57 Philippine pesos)