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Wound healing services and technology provider National Healing Corp. has recapitalized the company, turning to a new majority investor with a familiar face.

New York-based private equity firm Metalmark Capital provided the majority investment. Metalmark's team includes Managing Director M. Fazle Husain, who previously served as chairman of National Healing's board representing Morgan Stanley Venture Partners before he left to join Metalmark.

National Healing previously raised an undisclosed amount of capital through Morgan Stanley Venture Partners and Scale Venture Partners in 2005. Metalmark was established in 2004 after spinning out of Morgan Stanley Capital Partners to manage that firm's funds and new ones. Citigroup acquired Metalmark late last year.

The recapitalization deal marks a full exit for Morgan Stanley and a partial exit for Scale, National Healing Chief Executive Jim Patrick said. Scale sold some of its stake in the company and subsequently reinvested the majority of its proceeds, National Healing Chairman and Scale Managing Director Mark Brooks said. A previous individual investor in National Healing, Edgar Otto, was also bought out with the recapitalization, company Chief Executive Jim Patrick said. The terms and valuation of the deal, which closed Oct. 24, were not disclosed.

"It was a very nice gain for us," Brooks said of the transaction, which marks Scale's third life science exit this year and which he said were all "positive" events for the firm. The other exits include hospital staffing services company IPC The Hospitalist Co., which went public in January, and neurological drug developer Prestwick Pharmaceuticals Inc., which sold to Biovail Corp. for $100 million in cash in September. Scale is raising a targeted $400 million third fund, VentureWire reported in May.

"We are still a very significant shareholder" in National Healing, said Brooks, who declined to elaborate on return. "It's already a highly profitable company, and we think it has only begun to tap into the market."

With this transaction, National Healing's senior management reinvested in the company, Patrick said. The company also raised an undisclosed amount of debt financing through existing lender CapitalSource. The CapitalSource transaction resulted in a restructuring of National Healing's debt, while the company's overall debt was not increased, according to Patrick.

With Morgan Stanley's funds looking to sell interests in their funds in the next two to three years, Patrick said, National Healing was seeking a new investor that could support the company's growth.

"We thought it was important that we brought in a new fund with capital that would allow it to grow organically and through selected acquisitions," Patrick said. "They [Metalmark] were deeply familiar with our company and also had extensive experience in health care services. We were confident they would be a value-added investor for us."

National Healing, which works to create wound healing programs with hospital clients, is currently the second-largest provider of wound healing treatment services and technology in the United States, Patrick said. The company, currently with about 150 centers in 31 states, plans to add 30 to 40 new units per year. National Healing competes with Diversified Clinical Services Inc. and other regional services providers.

"The funding that we have in place through our investors we believe would be adequate to provide us the fuel we need to grow for the foreseeable future," Patrick said.

With the transaction, Scale's Brooks will remain chairman of National Healing's board. Metalmark will represent a majority of the board, while no specific appointments have been announced.

National Healing's financial and legal advisors included Broadpoint Capital and Ackerman, Senterfitt & Eidson. Metalmarks' financial and legal advisors included UBS and Ropes & Gray.

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