AAC Holdings Inc.

June 20, 2020

Tasteless joke alert: if there’s one thing that we would’ve thought would benefit from COVID it would be addiction. Our expenses are WAY DOWN across the board with one exception: alcohol.

We joke about it but the sad and honest truth is that there were a lot of people who likely needed help over the last several months that were unable to get it. Overdose deaths are spiking across the country. And so we hope that people are able to (safely) find answers/help now that things are finally opening back up across most of the country. Our tastelessness aside, it really isn’t a joking matter.

Unfortunately, American Addiction Centers ($AACH) has been kicking around the bankruptcy bin for a very long time now — long before COVID struck. Everyone knew a bankruptcy filing was coming. S&P Ratings has a “D” rating on this thing; Moody’s is rocking a Caa2. The first lien term loan due 2023 was, as of last week, just a hair over 41. Suffice it to say, all the signs were out there for the Tennessee-based inpatient and outpatient provider of substance abuse services.

And so AAC has finally met its fate. The company filed for chapter 11 in the District of Delaware in a rare Saturday night filing, listing $517.4mm of total debts against $449.4mm of total assets. That is textbook insolvency right there.

The company has a commitment of $62.5mm in DIP financing from its pre-petition lenders to fund the cases, operate in the ordinary course while in bankruptcy, and pursue a marketing process for the sale of its assets; it will use the bankruptcy process to de-lever its balance sheet; it notes that there’ll be no layoffs or facility closures as a result of the filing and that the company hopes to emerge from bankruptcy within 125 days. To this end, the company has an RSA with 89% of its first lien senior lenders and more than 50% of its junior lenders.

• Jurisdiction: D. of Delaware (Judge Dorsey)

• Capital Structure: $47mm senior lien facility, $316.6mm junior lien facility

• Professionals:

  • Legal: Greenberg Traurig LLP (David Kurzweil, Alison Elko Franklin, Dennis Meloro) & Chipman Brown Cicero & Cole LLP

  • Directors: Scott Vogel, Michael Logan

  • Financial Advisor: Carl Marks Advisors (Jette Campbell)

  • Investment Banker: Cantor Fitzgerald

  • Claims Agent: Donlin Recano & Co. Inc. (*click on the link above for free docket access)

• Other Parties in Interest:

  • DIP & Pre-Petition Agent: Ankura Trust Company LLC