EBH Topco LLC (a/k/a Element Behavioral Health Inc.)

5/23/18 

Behavioral health services and residential drug and alcohol addition treatment provider in 13 treatment centers across 8 states filed for bankruptcy. If that sounds boring: it's because it is. Which would explain why the Wall Street Journal felt compelled to drop in that its also the facility that treated Britney Spears and Lindsay Lohan. SEO just shot through the roof. Anyway, the company stated,

While the Company has had ongoing financial difficulties, the overall census of the facilities and revenue has declined since 2017. The decline in out-of-network admissions, lower reimbursement rates by insurance providers and the decline in the average length of stay were all contributing factors to the financial losses of the Company. While the Company attempted to increase census through ongoing marketing efforts of its in-house sales team and internet advertising, the increased cost of these efforts did not result in the increase in revenue to improve the financial results of the Company and offset the Company’s cash burn. Financial performance for the fiscal year 2017 was $103.7 million in revenue, $129.6 million in expenses, and EBITDA of $(25.9) million with a total net income/(loss) of $(51.2) million.

Given that the company started in 2008 and then pursued an acquisition-based growth strategy, it seems like they didn't underwrite to current conditions. Ouch. 

Just a few weeks ago, Project Build Behavioral Health, LLC purchased the first lien paper and after an initial buyer of the assets fell through, agreed to be the company' stalking horse bidder in bankruptcy subject to an expedited sale process (the sale hearing is slated for late June); it intends to credit bid its debt. The company has a proposed $14.2 million DIP credit facility lined up to fund the cases. 

• Jurisdiction: D. of Delaware (Judge Shannon)
• Capital Structure: $76mm '19 first lien term loan and revolver debt (Madison Capital Funding LLC), $29mm '20 second lien term loan (Cortland Capital Market Services LLC)
• Company Professionals:
  • Legal: Polsinelli PC (Christopher Ward, Shani Katona, Stephen Astringer, Jeremy Johnson)
  • CRO/Financial Advisor: Alvarez & Marsal LLC (Martin McGahan)
  • Investment Banker: Houlihan Lokey Capital Inc.
  • Claims Agent: Donlin Recano & Company Inc. (*click on company name above for free docket access)
• Other Parties in Interest:
  • DIP Lender/Stalking Horse Bidder: Project Build Behavioral Health, LLC
    • Legal: McDonald Hopkins LLC (David Agay, Scott Opincar, Michael Kaczka) & (local) Morris Nichols Arsht & Tunnell LLP (Derek Abbott)
  • Ad Hoc Group of Second Lien Lenders
    • Legal: Morrison & Foerster LLP (Jonathan Levine, Daniel Harris)
  • Equity sponsors: NEA, Frazier Healthcare Ventures, Formation Capital