"To be honest don't really care with EHE as I don't hold any. I...

"To be honest don't really care with EHE as I don't hold any. I invested in JHC which has low debt..around $35 m. In my opinion, the aged care sector as whole is keeper...just a poor managed EHE which drag the whole sector down."

@King1212,

Yes, I agree: JHC is in somewhat better shape than EHE, but JHC also has the better part of half a billion in RAD liabilities. At least, unlike EHE, JHC has some balance sheet wiggle room to service part of those RAD liabilities, should they come due.

But as you say, as long as EHE's challenges persist (and I don't see them fixing themselves organically), this will weigh down on the other listed aged care operators.

Like you, I am attracted to the demographic thematics of the aged care industry. But the reason I have not bought shares in any listed aged care operator to date, is that I have had serious reservations about the sustainability of the aggressive, somewhat Private Equity-esque, manner in which the industry funded its aggressive growth.

I suspect that the end game here is that the strong (JHC) will eventually end up gobbling up the weak (EHE), and that transaction will be accompanied by a relatively big capital raising (I reckon at least $250m of new equity will be needed to get any merged entity to a capital structure position that could be considered even remotely acceptable by most discerning institutional investors.)

I think once that event transpires, then that will be the time to become a shareholder in the industry. But I fear that there will be a lot more wailing and gnashing of teeth before we get there.

Because - against their liabilities - the listed sector is under-capitalised by as much as 30% of its current aggregate market capitalisation, to my way of thinking.

And before that is fixed, I think marginal institutional investors will remain cautious.