New Chapter 11 Filing - Orion Healthcare Corp.

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Orion Healthcare Corp.

3/16/18

You don't see this as the preface to a bankruptcy filing every day:

"...the Debtors are the victims of a large, complex, and brazen fraud that was subject to a complex and deliberate concealment effort perpetrated by their former management that was years in the making. After acquiring several of their businesses, the Debtors’ former CEO, Parmjit “Paul” Parmar (“Parmar,” who previously owned the company) took Constellation Healthcare Technologies, Inc., the parent company of the Debtors (and itself a Debtor), public on the London AIM and then proceeded to raise additional equity for additional acquisitions, many of which are believed to be largely or entirely fictitious. The Debtors borrowed approximately $130 million in debt in connection with a go-private transaction, the majority of which is believed to have been paid to Parmar (as a shareholder, through entities under his control), which is a financial burden the Debtors simply cannot sustain. The Debtors borrowed such funds based upon financials recently discovered by the Debtors’ new management and their professionals to be largely fictitious and involving numerous sham companies and fabricated transactions, revenues, and customers. The Debtors have commenced these chapter 11 cases to (i) market and sell their assets, (ii) wind down certain of their businesses, and (iii) to enable them to ultimately pursue claims against the individuals that put the Debtors in this position for the benefit of all their creditors."

Salacious. 

Orion Healthcare Corp. is in the business of (a) outsourced revenue cycle management (“RCM”) for physician practices, (b) physician practice management, (c) group purchasing services for physician practices, and (d) an independent practice association services, which is organized and directed by physicians in private practice to negotiate contracts with insurance companies on their behalf while such physicians remain independent and which also provides other services to such physician practices. The various businesses were cobbled together after a series of acquisitions. 

Constellation Healthcare LLC, a non-debtor, is an investment vehicle owned by Parmar and set up for the purpose of acquiring Orion back in 2013. Thereafter, the assets were transferred to a vehicle set up to be the holding company of the enterprise and subsequently listed on the London Stock Exchange's Alternative Investments Market. After that, the company went on an acquisition spree, picking up five new businesses. The company also hit the secondary market twice to finance the transactions. As if that isn't enough tomfoolery, the company then engaged in a take private transaction pursuant to which the sponsor contributed $82.5 million of cash as equity and the company obtained $130 million in financing from lenders. The company also issued unsecured promissory notes to its shareholders to the tune of $39.6 million. 

Parmar resigned from the company in September 2017 and, subsequently, the company has been engaged in a large forensic investigation that purports to have uncovered multiple fraudulent transactions while the company was publicly listed, including fabricated customer lists and associated revenue (which, naturally, would have the effect of jacking up valuation and violating reps and warranties, presumably, to the lenders). Moreover, it is alleged that there were a variety of sham acquisitions that had the effect of unjustly enriching Parmar to the detriment of the now-over-levered company.

In light of all of this - as well as the unsustainable debt on the balance sheet and other issues such as the lack of integration between business lines and various litigation - the company filed for bankruptcy. The purpose of the filing is to market and sell some of the business, wind down certain of the businesses, and pursue claims against a coterie of allegedly fraudulent m*therf*ckers. 

  • Jurisdiction: E.D. of New York (Judge Trust)

  • Capital Structure: $159.3mm senior term loan, revolving loan and bridge loan (Bank of America NA)

  • Company Professionals:

    • Legal: DLA Piper (US) LLP (Richard Chesley, Thomas Califano, Rachel Nanes)

    • Legal (Conflicts Counsel): Hahn & Hessen LLP

    • Financial Advisor/CRO: FTI Consulting Inc. (Timothy Dragelin)

    • Investment Banker: Houlihan Lokey Capital Inc. (Bradley Jordan, Dave Salemi, Andrew Redmond, Ethan Kopp, Jack Foster)

    • Independent Director: Robert Rosenberg

    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)

  • Other Parties in Interest:

    • Prepetition Agent & DIP Agent ($7.5mm): Bank of America NA

      • Legal: Moore & Van Allen PLLC (James Langdon, Zachary Smith, David Eades, Gabriel Mathless)

    • Parmjit Singh Parmar (and affiliated non-Debtor entities

      • Legal: Windels Marx Lane & Mittendorf LLP (Charles Simpson)

    • Official Committee of Unsecured Creditors (JQ 1 Associates LLC, Christine Cohen, Kolb Radiology P.C.)

      • Legal: Pachulski Stang Ziehl & Jones LLP (Ilan Scharf, Richard Mikels, Maxim Litvak)

      • Financial Advisor: CBIZ NY (Charles Berk, David Greenblatt, Sharmeen Khan, Patrick Donnelly, Michal Sudo)

Updated 11/28/18