New Chapter 11 Bankruptcy Filing - Hospital Acquisition LLC

Hospital Acquisition LLC

May 6 & 7, 2019

Texas-based Hospital Acquisition LLC and dozens of other affiliated companies operating in the acute care hospital, behavioral health and out-patient would care space have filed for bankruptcy in the District of Delaware.* The debtors operate 17 facilities in 9 states for a total of 865 beds; their revenue “derives from the provision of patient services and is received through Medicare and Medicaid reimbursements and payments from private payors.”

Technically, this is a chapter 22. In 2012, the debtors’ predecessor reeled from the effects of Hurricane Katrina and reduced reimbursement rates and filed for bankruptcy. The case ended in a sale of substantially all assets to the debtors.

So, why is the company in bankruptcy again? Well, to begin with, re-read the final sentence of the first paragraph. That’s why. Per the company:

…internal and external factors have lead the Debtors to an unmanageable level of debt service obligations and an untenable liquidity position. In 2015, Medicare’s establishment of patient criteria to qualify as an LTAC-compliant patient facility led to significant reimbursement rate declines over the course of 2015 and 2016 as changes were implemented. Average reimbursement rates for site neutral patients, representing approximately 57% of 2016 cases, is estimated to drop from $23,000 to $9,000 across the portfolio. When rates declined sharply, the Debtors were unable to adjust. Further, the number of patients that now qualify by Medicare to have services provided in an LTAC setting has declined substantially, resulting in a significant oversupply of LTAC beds in the market.

To offset these uncontrollable trends, the company undertook efforts to convert a new business plan focused around, among other things, closing marginally performing hospitals and diversifying the business into post-acute care “to compete in the evolving value-based health care environment.” To help effectuate this plan, the debtors re-financed its then-existing revolver, entered into its $15mm “priming” term loan, and amended and extended its then-existing term loan facility. After this transaction, the company had total consolidated long-term debt obligations totaling approximately $185mm.

So, more debt + revised business plan + evolving macro healthcare environment = ?? A revenue shortfall, it turns out. Which put the debtors in a precarious position vis-a-vis the covenants baked into the debtors’ debt docs. Whoops. Gotta hate when that happens.

The debtors then engaged Houlihan Lokey to explore strategic alternatives and engaged their lenders. At the time of filing, however, the debtors do not have a stalking horse agreement in place; they do hope, however, to have one in place by mid-July.

*There are also certain non-debtor home health owners and operators in the corporate family that are not, at this time, chapter 11 debtors.

• Jurisdiction: D. of Delaware (Judge Shannon)

• Capital Structure: $23.9mm RCF, $9.4mm LOCs, $15mm “Priming Term Loan” ($7.7mm funded), $136.8mm TL

• Professionals:

  • Legal: Akin Gump Strauss Hauer & Feld LLP (Scott Alberino, Kevin Eide, Sarah Link Schultz) & (local) Young Conaway Stargatt & Taylor LLP (M. Blake Cleary, Jaime Luton Chapman, Joseph Mulvihill, Betsy Feldman)

  • Financial Advisor: Houlihan Lokey Inc. (Geoffrey Coutts)

  • Investment Banker: BRG Capital Advisors LLC

  • Claims Agent: Prime Clerk LLP (*click on the link above for free docket access)

• Other Parties in Interest:

  • Equityholders: Monarch Master Funding Ltd., Twin Haven Special Opportunities Fund IV LP, Blue Mountain Credit Alternatives Master Fund LP, Merrill Lynch Pierce Fenner & Smith Inc., Oakstone Ventures Inc.

  • White Oak Healthcare Finance LLC

    • Legal: King & Spalding LLP (Arthur Steinberg, Scott Davidson) & (local) The Rosner Law Group LLC (Frederick Rosner, Jason Gibson)

  • Marathon Asset Management

    • Legal: Ropes & Gray LLP (Matthew Roose)

  • Prepetition Term Loan Agents: Seaport Loan Products LLC & Wilmington Trust NA

    • Legal: Shearman & Sterling LLP (Ned Schodek, Jordan Wishnew) & (local) Potter Anderson & Corroon LLP (Jeremy Ryan, R. Stephen McNeill, D. Ryan Slaugh)

  • Official Committee of Unsecured Creditors

    • Legal: Greenberg Traurig LLP (David Cleary, Nancy Peterman, Dennis Meloro) & (local) Bayard PA (Justin Alberto, Erin Fay, Daniel Brogan)
      

Updated 5/18

😷New Chapter 11 Filing - Astria Health😷

Astria Health

May 6, 2019

Astria Health, a large non-profit healthcare system based in Eastern Washington, has filed for bankruptcy along with a dozen or so affiliates. The company blames its chapter 11 filing on regulatory approval processes that stunted expansion plans, poor collections on accounts receivable, and charitable care that, despite best efforts, hadn’t been offset by charitable contributions. All of these issues have squashed cash flow and triggered issues with the debtors’ secured debt, part of which is uber-expensive. The debtors intend to use their DIP credit facility to take out their expensive “high cost of capital” MidCap Financial Trust-provided (and other) debt; they also hope to use the “breathing spell” provided by the automatic stay to remedy their collections problems and march towards a plan of reorganization within 150 days.

• Jurisdiction: E.D. of Washington (Judge Kurtz)

• Capital Structure: $72mm secured debt

• Professionals:

  • Legal: Dentons US LLP (Samuel Maziel) & (local) Bush Kornfeld LLP (James Day)

  • Claims Agent: KCC (*click on the link above for free docket access)

• Other Parties in Interest:

  • DIP Lender: JMB Financial Advisors

    • Legal: Arent Fox LLP (Robert Hirsh, Jordana Renert) & (local) Southwell & O’Rourke (Kevin O’Rourke)

New Chapter 11 Bankruptcy Filing - Air Force Village West Inc. (d/b/a Altavita Village)

Air Force Village West Inc. (d/b/a Altavita Village)

March 10, 2019

Another day, another continuing care retirement community in bankruptcy. Here, Air Force Village West Inc. (d/b/a Altavita Village), a California non-profit corporation with 361 residents filed for bankruptcy in the Central District of California. We’ve covered how CCRCs operate in some recent bankruptcy filings (e.g., 😷New Chapter 11 Bankruptcy Filing - Mayflower Communities Inc. (d/b/a The Barrington of Carmel)😷 and 😷New Chapter 11 Bankruptcy Filing - SQLC Senior Living Center at Corpus Christi Inc. (d/b/a Mirador)😷) and so we don’t necessarily see the point in repeating the business basics here. Suffice it to say: the CCRC business model requires some modifications. “The company has been operating at a loss and cannot pay its liabilities as they mature.” No sh*t.

Naturally, debt is part of the issue. The company owes $66mm in alleged secured indebtedness to its prepetition lenders; it has been in payment default since March 2017. The lenders subsequently sued for the appointment of a receiver and succeeded. After the receiver was in place, the receiver, the debtor and the lenders pursued a two-year sale process with two bankers (failed) and, then later, Cushman & Wakefield (“C&W”). C&W was able to locate a stalking horse bidder, Westmont Development LP, an affiliate of Westmont Living Inc., for a 363 sale of the debtor’s assets while in bankruptcy. In light of the fact that the company already pursued a robust sale process, it seeks to consummate the sale transaction by June 2019.

• Jurisdiction: C.D. of California (Judge )

• Professionals:

  • Legal: Dentons US LLP (Samuel Maziel, Tania Moyron, Gary Marsh, Bryan Bates)

  • Investment Banker: Cushman & Wakefield US Inc.

  • Claims Agent: KCC (*click on the link above for free docket access)

• Other Parties in Interest:

😷New Chapter 11 Bankruptcy Filing - Trident Holding Company LLC😷

Trident Holding Company LLC

February 10, 2019

It looks like all of those 2018 predictions about healthcare-related distress were off by a year. We’re merely in mid-February and already there has been a full slate of healthcare bankruptcy filings. Here, Trident Holding Company LLC, a Maryland-based provider of bedside diagnostic and other services (i.e., x-ray, ultrasound, cardiac monitoring) filed for bankruptcy in the Southern District of New York. What’s interesting about the filing is that it is particularly light on detail: it includes the standard description of the capital structure and recent efforts to restructure, but there is a dearth of information about the history of the company and its financial performance. There is, however, a restructuring support agreement with the company’s priority first lien lenders.

Here’s a quick look at the company’s capital structure which is a large factor driving the company into bankruptcy:

Source: First Day Declaration

As you can see, the company has a considerable amount of debt. The above-reflected “Priority First Lien Facility” is a fairly recent development, having been put in place as recently as April 2018. That facility, provided by Silver Point, includes a $27.1mm prepayment fee triggered upon the filing of the bankruptcy case. That’s certain to be a point of interest to an Official Committee of Unsecured Creditors. It also contributed to an onerous amount of debt service. Per the company:

In the midst of market and competitive challenges, Trident has significant debt service obligations. Over the course of 2018, Trident paid approximately $26,185,667.75 in cash interest on the Secured Credit Facilities. On January 31, 2019, the Company missed an interest payment of $9,187,477.07 on the Secured Credit Facilities, resulting in an Event of Default on February 8, 2019 after the cure period expired.

But, wait. There’s more. The recent uptick in distressed healthcare activity is beginning to aggregate and create a trickle-down bankruptcies-creating-bankruptcies effect:

Moreover, a number of recent customer bankruptcies – including those of Senior Care Centers, LLC, 4 West Holdings, Inc., and Promise Healthcare Group, LLC – have exacerbated the Company’s liquidity shortfall by limiting the collectability of amounts owed from these entities. A number of other customers who have not yet filed bankruptcy cases are generally not paying the Debtors within contractual terms due to their own liquidity problems. As a result of these collection difficulties and challenges with the new billing system in the Sparks Glencoe billing center, the Debtors recorded $27.8 million of extraordinary bad debt expense in 2018 and $12.7 million in 2017.

Ouch. Not to state the obvious, but if the start of 2019 is any indication, this is only going to get worse. The company estimates a net operating cash loss of $9.1mm in the first 30 days of the case.

Given the company’s struggles and burdensome capital structure, the company has been engaging its lenders for well over a year. In the end, however, it couldn’t work out an out-of-court resolution. Instead, the company filed its bankruptcy with a “restructuring support agreement” with Silver Point which, on account of its priority first lien holdings, is positioned well to drive this bus. And by “drive this bus,” we mean jam the junior creditors. Per the RSA, Silver Point will provide a $50mm DIP and drive the company hard towards a business plan and plan of reorganization. Indeed, the business plan is due within 36 days and a disclosure statement is due within a week thereafter. Meanwhile, the RSA as currently contemplated, gives Silver Point $105mm of take-back term loan paper and 100% of the equity of the company (subject to dilution). The first lien holders have a nice blank in the RSA next to their recovery amount and that recovery is predicated upon…wait for it…

…a “death trap.” That is, if they accept the plan they’ll currently get “ [●]%” but if they reject the plan they’ll get a big fat donut. Likewise, the second lien holders. General unsecured claimants would get a pro rata interest in a whopping $100k. Or the equivalent of what Skadden will bill in roughly, call it, 3 days of work??

The business plan, meanwhile, ought to be interesting. By all appearances, the company is in the midst of a massive strategic pivot. In addition to undertaking a barrage of operational fixes “…such as optimized pricing, measures to improve revenue cycle management by increasing collection rates, rationalizing certain services, reducing labor costs, better managing vendor spend, and reducing insurance costs,” the company intends to focus on its core business and exit unprofitable markets. While it retreats in certain respects, it also intends to expand in others: for instance, the company intends to “expand home health services to respond to the shifting of patients from [skilled nursing facilities] into home care.” Per the company:

Toward this end, Trident conducted successful home health care pilot programs in 2018 in two markets to optimize its Care at Home business model with radiology technicians dedicated to servicing home health patients. Trident hopes to expand this business model to an additional seven markets in 2019.

Like we said, a pivot. Which begs the question “why?” In addition to the debt, the company noted several other factors that drove it into bankruptcy. Chief among them? The rise of home health care. More from the company:

Trident has suffered ripple effects from the distress faced by skilled nursing facilities (“SNF”), which are its primary direct customers. SNF occupancy rates have declined to a multi-year low as a result of structural and reimbursement changes not yet offset by demographic trends. These structural changes include, among other things, patient migration to home health care. The decline in SNF occupancy rates has led to reduced demand for Trident’s services. At the same time, Trident has only had limited success reducing costs in response to lower volumes, as volume declines are driven by lower utilization per facility rather than a reduction in the number of facilities served.

This is a trend worth continued watching. Who else — like Trident — will be affected by this?

Large general unsecured creditors of the business include Grosvenor Capital Management, Jones Day (to the tune of $2.3mm…yikes), Konica Minolta Healthcare Americas Inc., McKesson ($MCK)(again!!…rough couple of weeks at McKesson), Quest Diagnostics Inc. ($DGX), Cardinal Health Inc. ($CAH) and others. They must be really jacked up about that pro rata $100k!!

• Jurisdiction: S.D. of New York (Judge Lane)

• Capital Structure: see above.

• Professionals:

  • Legal: Skadden Arps Slate Meagher & Flom LLP (Paul Leake, Jason Kestecher, James Mazza Jr., Justin Winerman)

  • Independent Director: Alexander D. Greene

  • Financial Advisor: Ankura Consulting (Russell Perry, Ben Jones)

  • Investment Banker: PJT Partners LP (Mark Buschmann, Josh Abramson, Willie Evarts, Meera Satiani, Elsa Zhang)

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

• Other Professionals:

  • Priority First Lien Admin Agent: SPCP Group LLC/Silver Point Finance LLC

    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP (Alan Kornberg, Robert Britton, Lewis Clayton, Aidan Synnott, Christman Rice, Michael Turkel)

    • Financial Advisor: Houlihan Lokey LP

  • First Lien Agent: Cortland Capital Market Services LLC

    • Legal: White & Case LLP (Thomas Lauria, Erin Rosenberg, Jason Zakia, Harrison Denman, John Ramirez)

  • Ad Hoc Group of First Lien Lenders

    • Legal: Kirkland & Ellis LLP (Patrick Nash)

    • Financial Advisor: Greenhill & Co. Inc.

  • Second Lien Agent: Ares Capital Corporation

  • Ad Hoc Group of Second Lien Lenders

    • Legal: Latham & Watkins (Richard Levy, James Ktsanes)

  • Large Creditor: McKesson Medical-Surgical Inc.

    • Legal: Buchalter P.C. (Jeffrey Garfinkle)

  • Large Creditor: Quest Diagnostics

    • Legal: Morris James LLP (Brett Fallon)

  • Equity Sponsor: Revelstoke Capital Partners

    • Legal: Winston & Strawn LLP (Carey Schreiber, Carrie Hardman)

  • Equity Sponsor: Welltower Inc.

    • Legal: Sidley Austin LLP (Andrew Propps, Bojan Guzina)

  • Official Committee of Unsecured Creditors

    • Legal: Kilpatrick Townsend & Stockton LLP (David Posner, Gianfranco Finizio, Kelly Moynihan)

    • Financial Advisor: AlixPartners LLP (David MacGreevey)
      
      
      
      

New Chapter Bankruptcy Filing - SAS Healthcare Inc.

SAS Healthcare Inc. 

January 31, 2019

Dallas/Fort Worth-based mental health facilities operator filed for bankruptcy last week in the Northern District of Texas. The more we read about these healthcare bankruptcies, the less and less assured we feel about healthcare generally. Holy sh*t a lot of them have hair on them. 

Here, the debtors operate three mental health treatment facilities — in Arlington, Dallas, and Fort Worth. Therein, the debtors provided — and we mean, "provided" — in-patient and out-patient mental health care to children, adolescents and adults struggling with substance abuse and addiction, mental health disorders and behavioral and psychological disorders. Why the past tense? Because thanks to an investigation by the Tarrant County District Attorney and subsequent indictments, the debtors ceased operations in December 2018. 

The debtors —owned in in equal 1/3 parts by three individuals — has $8.26mm in secured debt (Ciera Bank), a $503k drawn secured revolving line of credit with Ciera Bank, a $4.3mm secured term loan with Southside Bank (exclusive of another $3mm in unpaid principal and interest), a $5.6mm construction loan with Southside Bank (exclusive of another $4.3mm in unpaid principal and accrued interest); a $850k secured loan with Southside, a $400k second lien secured bridge note with REP Perimeter Holdings LLC, and $1.325mm subordinated secured note from the owners. 

Back to those closures. The grand jury investigation led to a lot of negative publicity which, in turn, led to an abrupt end in patient referrals from the two largest referral sources. The end effect? Decimated revenue. The company secured its bridge loan and performed operational triage but the second indictment proved to be a death knell. Without ongoing operations and with all of that debt, the debtors had to file for chapter 11 to trigger the automatic stay and buy itself time to conduct a marketing and sale process to sell their assets to stalking horse purchaser and prepetition lender, REP Perimeter Holdings LLC. 

• Jurisdiction: N.D. of Texas (Judge Mullin) 

• Company Professionals:

  • Legal: Haynes and Boone LLP (Stephen Pezanosky, Jarom Yates, Matt Ferris)

  • Financial Advisor: Phoenix Management Services LLC (Brian Gleason)

  • Investment Banker: Raymond James & Associates Inc. (Michael Pokrassa)

  • Claims Agent: Omni Management Group (*click on company name above for free docket access)

• Other Parties in Interest:

😷New Chapter 11 Bankruptcy Filing - Mayflower Communities Inc. (d/b/a The Barrington of Carmel)😷

Mayflower Communities Inc. (d/b/a The Barrington of Carmel)

January 30, 2019

Mayflower Communities, Inc. (d/b/a The Barrington of Carmel), a non-profit senior living retirement community of 271 units in the State of Indiana, filed for bankruptcy in the Northern District of Texas earlier this week. As a continuing care retirement community (“CCRC”), Barrington provides a battery of services to its residents ranging from recreational activities to assisted living, memory support, skilled nursing, and rehabilitation. Residents can get apartment homes on site.

The business model, however, is…well, interesting. Per the Company:

CCRCs, however, are often operationally and financially complex. More specifically, CCRCs can be challenging to operate because they require the maintenance of a broad range of services to seniors in varying stages of the aging process. Additionally, CCRCs require a steady flow of new residents in order to maintain day-to-day operations and to remain current on financial obligations, including, most importantly, obligations to current and former residents.

New residents = new revenue, which is also needed to meet debt obligations and comply with resident refund obligations.

Revenue comes from entrance fees ranging from approximately $316k to $650k, monthly serve fees from $2,800 to $7,600, and other per diem fees for skilled nursing, optional services fees and unit upgrade fees. In exchange, however, Barrington takes on a significant commitment. Per the company:

Unlike a pure rental retirement community, whereby a resident pays monthly fees for services (which fees may increase as the resident’s needs change), the Continuing Care Contract is a life care residency contract whereby a resident will pay an Entrance Fee and fixed monthly fees for Barrington’s commitment to provide life care services for the duration of the resident’s life, regardless of whether (i) the resident’s needs change over time which may require additional services to be provided by Barrington, or (ii) the costs of providing such services increase for Barrington. Significantly, Barrington’s commitment to provide life care services continue even if the resident’s financial condition deteriorates and is unable to continue to make its payments.

Non-profit, indeed. That sounds like a recipe for fiscal disaster.

The company reported $96.5mm in assets and $151.9mm in liabilities, including oversight fees owed to its management company, $52.4mm in resident refund obligations, $92.7mm (plus accrued interest) of long-term municipal bond obligations and $4.1mm of subordinated note obligations.

The aforementioned debt is a big problem. Compounding matters is the fact that the senior housing market in the geographic vicinity is “very competitive” which led to rental price and, by extension, margin, compression. Lower-than-projected revenues combined with the debt led to Barrington defaulting on its municipal bond obligations back in November. Consequently, the Bond Trustee commenced a receivership action. To forestall the Bond Trustee’s subsequent efforts to, among other things, displace the board and sole member, pursue a sale of the facility, and potentially reject continuing care contracts, the company filed for bankruptcy wherein it will leverage the “automatic stay” and “potentially pursue a sale of the Facility.”

• Jurisdiction: N.D. of Texas

• Company Professionals:

  • Legal: DLA Piper LLP (Thomas Califano, Rachel Nanes, Andrew Zollinger)

  • Financial Advisor/CRO: Ankura Consulting LLC (Louis Robichaux IV) & Larx Advisors Inc.

  • Investment Banker: Cushman & Wakefield U.S., Inc.

  • Claims Agent: Donlin Recano & Company (*click on company name above for free docket access)

• Other Parties in Interest:

New Chapter 11 Bankruptcy Filing - Senior Care Centers LLC

Senior Care Centers LLC

December 4, 2018

Ok, we take it back. We’ve been saying how healthcare distress was overhyped in the beginning of the year and now a mini-wave of healthcare-related bankruptcy filings has hit dockets across the country. It’s cool: we don’t take it personally.

Here, Senior Care Centers LLC and its bazillion affiliated debtors, filed for bankruptcy in the Northern District of Texas. The debtors are one of the largest skilling nursing services providers in the US, providing care for approximately 9k patients in Texas and Louisiana. They operate 97 skilled nursing facilities, 9 assisted living facilities and 6 hospice facilities. The company notes:

Like much of the healthcare sector, the operators of skilled nursing facilities (“SNFs”) are and have been experiencing significant challenges and financial distress in recent years. The challenges faced by the Debtors are similar to those experienced by other SNF operators and widespread within the skilled nursing industry. The Debtors faced increasing financial pressure in 2017 and 2018 cause by, among other things, declining reimbursement rates, difficulties in collecting accounts receivable, declining census, and occupancy rates, increasing lease obligations, tightening terms with various trade creditors, and a significantly reduced working capital loan facility. All of these factors have combined to negatively impact the Debtors’ operations.

Getting more specific, the company adds:

Since 2017, the Company experienced significant liquidity constraints caused by, among other things: (a) increasing rent and “above-market” leases with various Landlords; (b) declining performance within the current portfolio for a variety of industry-wide developments; (c) tightening terms with various trade creditors; and (d) declining census. The Company has struggled to respond to liquidity issues for several months. In July of 2018, Administrative Agent began establishing Borrowing Base reserves, resulting in reduced availability under the Credit Facility.

The immediate cause for the filing of these Chapter 11 Cases was due to liquidity issues resulting from reduced Borrowing Base availability. This problem was compounded when certain of the Debtors’ landlords issued termination and/or default notices (the “Landlord Notices”).

Certain vendors demanded modification to payment terms, which restricted or eliminated the Company’s trade credit. Moreover, relationships with current and prospective Employees and Patients have been affected by the uncertainty. For example, several recent candidates have rescinded their offers to join the Company and expressed concern regarding the Company’s financial stability.

That story should sound wildly familiar by now.

Of significance, however, is the company’s relationship with Sabra Health Care REIT Inc. ($SBRA), which is one of the major landlords who issued termination/default notices (over which there is some dispute as to whether they were subsequently withdrawn). Sabra owns CCP which is the debtors’ second lien lender. More importantly, Sabra is the landlord on approximately 40 of the debtors’ facilities. The debtors owe Sabra $31.78mm in unpaid rent, common area maintenance charges and taxes.

Interestingly, Sabra’s own commentary about the debtors’ situation probably didn’t help matters much. On its Q3 earnings call on November 6, Sabra said a number of things about the debtors’ inability to pay rent, a potential sale of the debtors, its efforts to obtain financing, and management’s skittishness about any go-forward transaction that would endanger their jobs. On that last point, Sabra indicated that it was discussing go-forward options directly with the debtors’ board as a result. The debtors’ various constituents could obvious see/hear these comments and react accordingly.

But the Sabra commentary also demonstrates how difficult the current environment is for SNFs right now. Some big takeaways from their earnings call:

• It is reducing its exposure to Texas, its largest state, “which also happen to be the one state where there is an oversupply of skilled nursing beds in a number of markets due to new product. And Texas also has one of the weakest Medicaid systems in the country.” (PETITION Note: scour the Googles for other SNFs highly indexed to Texas for future distressed/bankruptcy candidates).

• Skilled operators (read: private equity) are in acquisition mode and, therefore, pricing is high even for product that isn’t of the highest quality. (PETITION Note: “too much money chasing too few deals.” This should, theoretically, bode well for the debtors’ proposed sale, if so). Sabra’s CEO Rick Matros said, “we're not seeing much good skill product and I really believe that that's a function of the skilled operators are buying everything all of us are selling, but they're not putting reasonable assets on the market because everybody sees the light at the end of the tunnel both in terms of the demographic in terms of decreasing supply and in terms of the positive benefits of PDPM reimbursements system that’s going go into effect next October.”

• Smaller SNFs will succumb to bankruptcy. Matros added, “My guess is over the course of the next year particularly with the mom-and-pops, we'll probably see more products come to market as a number of the smaller providers determine that they don't have the wherewithal or the desire to go through the transition that is going to be required to go through to be successful post-PDPM.”

In other words, there should be a healthy amount of M&A and distressed activity in the near future in the SNF space.

Anyway, back to the debtors: they hope to use the automatic stay provided by the filing to transition underperforming facilities to new operators in coordination with its landlords and sell their profitable facilities. They will use cash collateral to fund the cases.

• Jurisdiction: N.D. of Texas (Judge Houser)

• Funded Capital Structure: $33.06mm RCF, $9.53mm HUD RCF, $4.3mm CCP (second lien) Loan   

• Company Professionals:

  • Legal: Polsnielli PC (Jeremy Johnson, Trey Monsour, Stephen Astringer, Nicholas Griebel)

  • Conflicts Legal: Huntons Andrews Kurth LLP

  • CRO & Financial Advisor: Newbridge Management LLC (Kevin O’Halloran) & BDO USA LLP

  • Communications Consultants: Sitrick and Company

  • Claims Agent: Omni Management Group LLC (*click on company name above for free docket access)

• Other Parties in Interest:

  • Large Creditor: Sabra Health Care Reit, Inc.

  • Sponsor: Silver Star Investments LLC

  • Admin Agent & Lender: CIBC Bank USA

    • Legal: Duane Morris LLP (John Weiss, Rosanne Ciambrone) & (local) Haynes and Boone LLP (Stephen Pezanosky, Matthew Ferris)

New Chapter 11 Filing - Orion Healthcare Corp.

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

New Chapter 11 Filing - HCR Manorcare Inc.

HCR Manorcare

3/4/18 Recap: Ohio-based Carlyle-backed long-term care provider of 450 (i) skilled nursing and impatient rehab facilities, memory care facilities and assisted living facilities (the "Long-Term Care Business"), (ii) hospice and home health care agencies, and (iii) outpatient rehab clinics filed a prepackaged bankruptcy after months of back-and-forth with its REIT-parent and Master Lease counterparty, Quality Care Properties Inc. ($QCP). The bankruptcy will effectuate a transaction pursuant to which QCP will shed its REIT status and take on 100% of the stock in the reorganized HCR. 

Interestingly, retailers aren't the only businesses capitulating under the weight of their rent. Here, the revenues generated by the Long-Term Care Business weren't generating sufficient revenues to cover ordinary course operating expenses and monthly rent obligations to QCP. By way of illustration, 

"For the twelve months ended December 31, 2017, the Company had revenues of approximately $3.741 billion, 82% of which derived from the Long-Term Care Business, and reported a consolidated pre-tax loss from continuing operations of approximately $267.9 million. As of December 31, 2017, the Company had approximately $4.264 billion in total assets and approximately $7.118 billion in total liabilities, debt and financing obligations...."

Rough. In 2016, HCR paid approximately $442mm ($37mm a month) in minimum rent to QCP. In 2017, after extensive negotiations, the amount dipped to $290mm ($24mm a month). With amounts that staggering, no wonder the company struggled. 

The relationship between QCP and HCR emanates out of a 2011 sale-leaseback transaction. After said transaction, QCP became an independent publicly traded company. Significantly,

"At the time of the 2011 Transaction, the business environment in the post-acute/skilled nursing sector was favorable due to a number of factors, including an aging population, expected increases in aggregate skilled nursing expenditures, and supply constraints in the skilled nursing sector due to substantial barriers to entry. The parties negotiated the amount of rent payable under the MLSA against this background."

But, as we consistently point out here at PETITION, projections don't always pan out as planned. Indeed, after the consummation of the 2011 transaction, 

"...the operating environment for post-acute/skilled nursing facility operators has become significantly more challenging. Unfavorable trends for operators of skilled nursing facilities include (a) a shift away from a traditional fee-for-service model toward new managed-care models, which base reimbursement on patient outcome measures; (b) increased penetration of Medicare Advantage plans, which has reduced reimbursement rates, average length of stay and average daily census; (c) increased competition from alternative healthcare services such as home health agencies, life care at home, community-based service programs, senior housing, retirement communities and convalescent centers; and (d) reductions in reimbursement rates from government payors."

Obviously this is a bit of a problem when your have a month rent nut of $37mm. 

• Jurisdiction: D. of Delaware (Judge Gross)
• Capital Structure: $400mm '18 9.5% TL debt (RD Credit LLC), $150mm '19 9.5% RCF, $445mm guaranty obligations under the Master Lease.
• Company Professionals:
  • Legal: Sidley & Austin LLP (Larry Nyhan, Dennis M. Twomey, William A. Evanoff, Allison Ross Stromberg, Matthew E. Linder) & (local) Young Conaway Stargatt & Taylor LLP (Robert S. Brady, Edmon L. Morton, Justin H. Rucki, Ian J. Bambrick, Tara Pakrouh)
  • Financial Advisor/CRO: AlixPartners LLC (John Castellano)
  • Investment Banker: Moelis & Co.
  • Independent Directors: Sherman Edmiston, Kevin Collins
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)
• Other Parties in Interest: TBD. 

Updated 3/5/18

New Chapter 11 Bankruptcy - PhaseRX Inc. ($PZRX)

PhaseRX Inc.

• 12/11/17 Recap: Seattle-based and once-VC-backed publicly-traded ($PZRX) biopharma company focused on therapeutics developed to treat enzyme deficiencies in the liver via intracellular enzyme replacement therapy (after a pivot from from focusing on the treatment of liver cancer) filed for bankruptcy. The company seeks a sale through bankruptcy. 
• Jurisdiction: D. of Delaware (Judge Sontchi)
• Capital Structure: $500k promissory note (Titan Multi-Strategy Fund Ltd.), $16.2mm 8% convertible notes, $4mm 5% term loan, $5.1mm secured loan (Hercules Capital Inc.)
• Company Professionals:
  • Legal: Polsinelli PC (Christopher Ward, Shanti Katona, Nicholas Griebel)
  • Investment Banker: Cowen & Company 
  • Claims Agent: Donlin Recano & Co. Inc. (*click on company name above for free docket access)
• Other Parties in Interest:
  • Large Equityholders/Venture Capital: (Arch Venture Fund VII LP, 5AM Ventures, Savoy Therapeutics Corp., Versant Venture Capital III LP)
  • Hercules Capital Inc. 
    • Legal: Cole Schotz PC (Patrick Reilley, Stuart Komrower)

Updated 12/12/17

New Chapter 11 Bankruptcy - Dextera Surgical Inc. ($DXTR)

Dextera Surgical Inc.

• 12/11/17 Recap: Publicly-traded ($DXTR) California based med-device company that designs and and manufactures proprietary stapling devices that enable the advancement of minimally invasive surgical procedures has filed for bankruptcy to effectuate a sale. Why bankruptcy? Per the company's pleadings, "Dextera invested in obtaining regulatory clearances and product development, evaluation, and manufacturing, but experienced interruptions in the ability to produce both staplers and staple reload cartridges to meet customer demand. It also incurred substantial operating losses that significantly impacted liquidity, ultimately leading to the need to file the Chapter 11 Case." The company has lined up a stalking horse purchaser (Aesculap Inc.) who also happens to be the provider of $1.5mm in DIP financing to effectuate the case. The purchase price is reported to be approximately $17.3mm. 
• Jurisdiction: D. of Delaware (Judge Carey)
• Capital Structure: $4mm 5% secured note     
• Company Professionals:
  • Legal: Saul Ewing Arnstein & Lehr LLP (Mark Minuti, Teresa Currier, Monique DiSabatino)
  • Special Legal: Cooley LLP (Robert Eisenbach)
  • Financial Advisor: JMP Securities LLC
  • Claims Agent: Rust Consulting/Omni Bankruptcy (*click on company name above for free docket access)
• Other Parties in Interest:
  • DIP Lender/Stalking Horse Bidder: Aesculap Inc.
    • Legal: Stevens & Lee PC (Joseph Huston Jr., Robert Lapowsky)

Updated 12/13/17

New CBCA Proceeding - Concordia International Group

Concordia International Group

• 10/20/17 Recap: Canadian-based pharmaceutical company filed for a stay under the Canada Business Corporations Act (CBCA) to effectuate a plan to de-lever its balance sheet. The company has a portfolio of 200+ "off-patient" skus with sales all across the world. The company blamed the need for the filing on (i) the proliferation of competitive generic products, (ii) the introduction of new products that treat the same ailments Concordia addresses, (iii) drug pricing pressures (including regulatory pressures in the UK), and its highly-levered balance sheet. The company intends to deploy its "DELIVER" strategy - not to be confused with what should be an obvious DELEVER strategy, but we digress. This acronym stands for a bunch of trite stuff like "Drive growth, "Expand," "Level-set the U.S. Business," "Increase the Product Pipeline," blah blah boring blah blah. In other words, effectively operate a pharma business - the EOPB strategy. Fine, not quite the same ring to it. 
• Jurisdiction: Superior Court of Ontario
• Capital Structure: $1.068b secured term loan, £485.63mm secured term loan. $350mm 9% '22 senior secured first lien notes, $135mm 9.5% '22 extended unsecured bridge loan ($100.83 funded ex-interest), $45mm 9.5% '17 equity unsecured bridge loan ($33.61mm ex-interest), $735mm 7% '23 unsecured notes (ex-interest), and $790mm 9.5% '22 unsecured notes (ex-interest)(US Bank NA). Public equity ($CXR).     
• Company Professionals:
  • Legal: Skadden Arps Meagher & Flom LLP (Paul Leake, Shana Elberg) & (Canadian) Goodmans LLP (Robert Chadwick, Brendan O'Neil, Caroline Descours, Ryan Baulke)
  • Financial Advisor: Perella Weinberg Partners LP
• Other Parties in Interest:
  • Secured Term Loan Agent: Goldman Sachs Bank USA
    • Legal: Davis Polk & Wardwell LLP (Damian Schaible)
  • Secured Debtholders Committee
    • Legal: White & Case LLP & (Canadian) Osler Hoskin & Harcourt LLP (Marc Wasserman, Martino Calvaruso)
  • Trustee for Secured and Unsecured Notes: US Bank NA
  • Unsecured Debtholders Committee
    • Legal: Paul Weiss Rifkind Wharton & Garrison LLP & (Canadian) Bennett Jones LLP (Kevin Zych, Sean Zweig)

Updated 10/26/17

New Chapter 11 Filing - Morehead Memorial Hospital

Morehead Memorial Hospital

• 7/10/17 Recap: North Carolina non-profit 108-bed general acute care community hospital and owner of a 121-bed skilled nursing facility filed for bankruptcy. The healthcare provider noted the following reasons for the bankruptcy filing: (i) decreased patient volume, net revenue and free cash flow due, in large part, to the delivery of medical services occurring increasingly in ambulatory and emergency room settings; (ii) low reimbursement rates for medical services; (iii) expensive and only partially-reimbursed service in fulfillment of its non-profit mission; (iv) rising costs and increased competition (including competition for physicians given the hospital's rural nature); and (v) debt and legacy pension liability. The hospital will use the bankruptcy period to undertake both an operational and balance sheet restructuring while contemporaneously seeking a potential strategic healthcare provider partner. 
• Jurisdiction: M.D. of North Carolina (Judge Kahn)
• Capital Structure: $34mm debt     
• Company Professionals:
  • Legal: Waldrep LLP (Thomas Waldrep Jr., Jennifer Lyday, Francisco Morales)
  • Financial Advisor: Grant Thornton LLP (Scott B. Davis)
  • Investment Banker: Hanlon Hammond Camp LLC (Michael Lane)
  • Claims Agent: Donlin Recano & Company Inc. (*click on company name above for free docket access)

Updated 7/13/17 6:36pm CT

First Day Declaration

New Chapter 11 Filing - Foundation Healthcare Inc.

Foundation Healthcare Inc.

• 6/22/17 Recap: Once publicly-traded owner ($FDNH) and manager of surgical facilities that, at its peak, owned and/or managed 5 surgical hospitals, 9 ambulatory surgical centers and 3 outpatient departments in the Southeastern United States filed for bankruptcy to liquidate. Boom, done. 
• Jurisdiction: N.D. of Texas (Nelms)
• Company Professionals:
  • Legal: Husch Blackwell LLP (Vickie Driver, Christina Stephenson)
  • Financial Advisor/CRO: Ankura Consulting Group LLC (Michael Miller)
  • Claims Agent: Donlin Recano & Company Inc. (*click on company name above for free docket access)

Updated 7/11/17

New Chapter 9 Filing - The Kennewick Public Hospital District

The Kennewick Public Hospital District (aka Trios Health)

• 6/30/17 Recap: Now this is a different kind of healthcare bankruptcy filing. The District, which does business as Trios Health, was established in Benton County Washington by state statute in 1948 and is governed by a seven-member publicly-elected Board of Commissioners; it is one of the largest multi-specialty medical groups in Eastern Washington comprised of 2 hospitals and 10 urgent/outpatient care centers. To "remain competitive and retain market share," the District expanded and invested in improvements. This included a new hospital facility in a "relatively affluent" area, as well as the construction of complementary medical office space. This was all state-of-the-art. Which of course costs a boatload of dough (see capital structure info below). And so the Board issued revenue bonds secured by gross revenues and a subsequent bond secured by taxes. Of course, all of the foregoing was predicated upon a feasibility study that baked in revenue projections. And counted on revenue from HMO and PPO plans offered by Group Health. Want to guess how that all played out? Well, let us tell you. The projections were inflated. Shocker right? To be fair, the District's competitor, Kadlec, negotiated for the exclusion of the District from the Group Health Plans; it also opened a competitive emergency room nearby. So revenues failed to live up to expectations while secured obligations lived up to expectations. Creditors weren't happy and the District felt forced into action. Hence, Chapter 9. 
• Jurisdiction: E.D. of Washington (Corbit)
• Capital Structure: see below.     
• Company Professionals:
  • Legal: Foster Pepper PLLC (Jack Cullen, Bryan Glover, Andy Morton, Ella Vincent)
  • Claims Agent: Garden City Group LLC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Official Committee of Unsecured Creditors
    • Legal: Arent Fox LLP (Andrew Silfen, George Angelich, Jordana Renert) & (local) Hillis Clark Martin & Peterson P.S. (Bradley Duncan, Josh Rataezyk)
  • Creditor: Kennewick Holdings LLC
    • Legal: Gibson Dunn & Crutcher LLP (Jeffrey Krause, Matthew Kelsey, Jason Goldstein) & (local) Davis Wright Tremaine LLP (Ragan Powers, Hugh McCullough)

Page 5 of First Day Declaration

Updated 10/5/17

New Chapter 11 Filing - 21st Century Oncology Holdings Inc.

21st Century Oncology Holdings Inc.

• 5/21/17 Recap: People have been talking about an uptick in healthcare-related bankruptcies. Is this the start? Here, Florida-based cancer care provider founded in the early 80s with 179 locations (including some in South America and Latin America) finds itself in bankruptcy court after years of acquisitions (including once-bankrupt Oncure Holdings Inc.) and a perfect storm of causes - most notably, an over-levered balance sheet. Other contributing factors to the company's chapter 11 filing include (i) decreased reimbursements under current insurance programs, (ii) Medicare changes, (iii) a shift from higher revenue per treatment PPO insurance plans to HMO plans, and (iv) government regulations, penalties and settlements. Some government inquiries remain outstanding. The company has a restructuring support agreement in place, a proposed $75mm DIP credit facility, and the plan is to delever the balance sheet by up to $500mm.
• Jurisdiction: S.D. of New York
• Capital Structure: $599mm TL & $121mm RCF (Morgan Stanley Senior Funding), $35mm MDL Facility (Wilmington Savings Fund Society), $368mm 11% '23 senior unsecured notes (Wilmington Trust National Association), $19mm PIK notes    
• Company Professionals:
  • Legal: Kirkland & Ellis LLP (James Sprayragen, Christopher Marcus, William Guerrieri, John Weber, Alexandra Schwarzman, Mark McKane, Michael Esser)
  • Financial Advisor: Alvarez & Marsal LLC (Paul Rundell)
  • Investment Banker: Millco Advisors LP (Brendan Hayes)
  • Claims Agent: KCC (*click on company name above for free docket access)
• Other Parties in Interest:
  • Prepetition MDL Agent: Wilmington Savings Fund Society FSB
    • Legal: Pryor Cashman LLP (Seth Lieberman, Patrick Sibley, Matthew Silverman)
  • First Lien Ad Hoc Committee and DIP Lenders (Apex Credit Partners LLC, Black Diamond Capital Management LLC, BlueMountain CLO Management LLC, Carlson Capital LP, Deutsche Bank AG New York Branch, GMO Credit Opportunities Fund LP, Goldman Sachs Asset Management LP, HPS Investment Partners LLC, IA Clarington Investments Inc., Intermarket Corporation, Key Bank National Association, MJX Asset Management LLC, Morgan Stanley Senior Funding Inc., Och-Ziff Capital Investments LLC, Q Investments LP, Silver Rock Financial LP, Wazee Street Capital Management LLC, Wells Fargo NA)
    • Legal: Milbank Tweed Hadley & McCloy LLP (Dennis Dunne, Evan Fleck, Matthew Brod)
    • Financial Advisor: PJT Partners LP
  • Ad Hoc Group of Crossholder Lenders
    • Legal: Stroock Stroock & Lavan LLP  (Frank Merola, Jayme Goldstein, Matthew Schwartz, Samantha Martin)
    • Financial Advisor: Houlihan Lokey Capital Inc.
  • Major Equity Holders (Canada Pension Plan Investment Board, Vestar Capital Partners V LP)
    • Legal for CPPIB: Debevoise & Plimpton LLP (Mi Chi To)
  • DIP Administrative Agent: Morgan Stanley Senior Funding
    • Legal: Cahill Gordon & Reindel LLP (Joel Levitin, Richard Stieglitz Jr.)
  • Patient Care Ombudsman
    • Legal: Otterbourg PC (Melanie Cyganowski, Keith Costa, Jennifer Feeney)
  • Backstop Parties: Beach Point Capital Management LP, Governors Lane LP, JPMorgan Investment Management Inc., Oaktree Capital Management LP, Roystone Capital Management LP, HPS Investment Partners LLC
  • Official Committee of Unsecured Creditors
    • Legal: Morrison & Foerster LLP (Lorenzo Marinuzzi, Jonathan Levine, Daniel Harris, Benjamin Butterfield)

Updated 7/11/17

New Chapter 11 Filing - Oconee Regional Health Systems Inc.

Oconee Regional Health Systems Inc.

• 5/11/17 Recap: Georgia-based not-for-profit healthcare system filed for bankruptcy to pursue a sale to Prime Healthcare Foundation Inc., armed with a $5mm DIP credit facility to fund operations during the case. The company notes the following as factors leading up to its bankruptcy: (1) an older Medicare-based population, revenue from which is subject to discounts and write-offs; (2) a large Medicaid-dependent population, reimbursements for which result in financial losses on many patients; (3) The State of Georgia's election NOT to partake in the Medicaid expansion program which left a pool of patients with modest means uncovered and uncompensated-for upon treatment; (4) hospital consolidation providing newer larger options (PETITION note: this seems dubious considering there were no other hospitals within a 30-mile radius but what do we know?); (5) lack of doctors in in-demand specialty areas; (6) inability to finance large capital intensive projects; and (7) service to "self-pay" (read: uninsured) patients as part of its non-profit charitable function - despite efforts by the ACA to cover everyone. Sadly, the company's filings paint a picture of a dire healthcare situation in and around the Georgia with healthcare operators all around the state failing for many of the same reasons above.
• Jurisdiction: M.D. of Georgia
• Capital Structure: $22mm principal and interest Series 1998 Bonds, $7.3mm principal and interest Series 2016 Bonds     
• Company Professionals:
  • Legal: Bryan Cave LLP (Mark Duedall, Leah Fiorenza McNeill)
  • Financial Advisor: Grant Thornton LLP
  • Investment Banker: Houlihan Lokey Capital Inc.
• Other Parties in Interest:
  • Buyer: Prime Healthcare Foundation Inc.
    • Legal: King & Spalding LLP (Paul Ferdinands)

New Chapter 11 Filing - Adeptus Health Inc.

Adeptus Health Inc.

• 4/19/17 Recap: Publicly-traded ($ADPT) Texas-based for-profit hospital operator filed for bankruptcy to effectuate a sale of the business to Deerfield Management Company. The company blames significant working capital needs, challenges with revenue cycle management, and reduced utilization and patient volume for its filing. Deerfield is providing the company a $45mm DIP credit facility. 
• Jurisdiction: N.D. of Texas
• Capital Structure: $212.75mm total debt. $61.9mm RCF (Bank of America), $132mm TL (A-1 and A-2, latter with Goldman Sachs Lending Partners), $13.09mm LOC (Bank of America), $7.5mm bridge loan (Deerfield Management Company)    
• Company Professionals:
  • Legal: Norton Rose Fulbright LLP (Louis Strubeck Jr., Kristian Gluck, John Schwartz, Liz Boydston, Timothy Springer)
  • Financial Advisor/CRO: FTI Consulting (Andrew Hinkelman)
  • Investment Banker: Houlihan Lokey Capital Inc.
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name for docket)
• Other Parties in Interest:
  • Deerfield Management Company LP
    • Legal: Katten Muchin Rosenman LLP (Peter Siddiqui, Paige Barr)
  • MatlinPatterson Global Opportunities Master Fund LP
    • Legal: Ropes & Gray LLP (Mark Somerstein, Keith Woffard) & (local) Porter Hedges LLP (John Higgins, Joshua Wolfshohl)
  • Wexford Spectrum Investors LLC and Debello Investors LLC
    • Legal: Winstead PC (Phillip Lamberson, Rakhee Patel, Annmarie Chiarello)
  • Healthcare Ombudsman: Daniel McMurray
    • Legal: Neubert, Pepe & Monteith PC (Mark Fishman) & (local) Quilling Selander Lownds Winslett & Moser PC (Joshua Shephard)
    • Medical Operations Advisor: Focus Management Group USA (Daniel McMurray, James Grobmyer, Angeline Bernard, Sandra Casper)
  • Official Committee of Unsecured Creditors
    • Legal: Akin Gump Strauss Hauer & Feld LLP (Sarah Link Schultz, Marty Brimmage, David Botter, Alexis Freeman)
    • Financial Advisor: CohnReznick LLP (Chad Shandler)
  • Official Committee of Equity Security Holders
    • Legal: Brown Rudnick LLP (Edward Weisfelner, Bennett Silverberg, Jeffrey Jonas) & Winstead PC (Rakhee Patel, Phil Lamberson)
    • Financial Advisor: Miller Buckfire & Co. LLC & Stifel Nicolaus & Co. (Richard Klein)

Updated 7/13/17

New Chapter 11 Filing - Halt Medical Inc.

Halt Medical Inc.

• 4/12/17 Recap: Brentwood California medical device company filed for bankruptcy because Ares Capital HALTed funding (#dadjoke). The company owns an FDA-cleared proprietary and patented product that uses radiofrequency ablation to destroy uterine fibroids. Yeah, we have no idea what that means either but the use case is bada$$: it is a minimally-intrusive alternative to hysterectomies and myomectomies. The company has lined up a $4.16mm DIP credit facility to fund the cases while it seeks an asset sale to Murray Enterprises LLC as stalking horse bidder. 
• Jurisdiction: D. of Delaware 
• Capital Structure: $155.6mm debt (Ares Capital Ltd., as successor to American Capital Ltd.)    
• Company Professionals:
  • Legal: Drinker Biddle & Reath LLP (Steven Kortanek, Patrick Jackson, Joseph Argentina Jr.) & (Special corporate counsel) Cooley LLP (Robert Eisenbach)
  • Investment Banker: Canaccord Genuity Group Inc. (Geoffrey Richards)
  • Claims Agent: Donlin Recano & Co. Inc. (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Buyer: Acessa AssetCo LLC (affiliate of Murray Enterprises LLC)
      • Legal: Smith Gambrell & Russell LLP (Brian Hall) & Landis Rath & Cobb LLP (Adam Landis, Kerri Muford)

Updated 4/22/17 (note: no UCC appointed)

New Chapter 11 Filing - Unilife Corporation

Unilife Corporation

• 4/12/17 Recap: Publicly-traded ($UNIS) manufacturer and B2B supplier of injectable drug delivery systems (including wearables) to pharmaceutical and biotechnology customers filed for bankruptcy to attempt a 363 sale of the business. This is kind of like a bad episode of Shark Tank. The Company appears to manufacture pretty innovative drug delivery systems - innovative in that the devices seem to be unobtrusive and, if we understand this correctly, help patients receive treatments without the need for multiple needles. But this is one of those episodes where the Sharks start asking about the numbers and they ain't pretty: the company is post-revenue and has some patents but it is pre-FDA approvals and pre-delivery (of medicine) to end users. Its limited revenue source is through negotiated supply agreements. It has a lot of debt (see below) and an expensive facility lease. It also had - in a very Kevin O'Leary-like fashion - a royalty agreement with its senior secured lender (ROS) which entitled ROS to a 4.52% royalty on the first $50mm of net sales (with ratchets for higher sales). So sharky. Of course, this isn't really that relevant when your incurred net losses are $100.8mm like they were in '16 (but we really enjoyed playing with the analogy). Now, ROS is providing a $7.5mm DIP credit facility to fund the cases for 90 days so that the company can attempt to find a buyer (note: there is no stalking horse bidder). Reminder: this was a PUBLICLY-TRADED company so, surely, there are some angry shareholders somewhere. 
• Jurisdiction: D. of Delaware
• Capital Structure: $70mm secured term loan (ROS Acquisition Offshore LP), $45.7mm senior secured convertible note (Amgen Inc.), $12.1mm mortgage (First National Bank), $1.9mm financing authority loan (Keystone Redevelopment Group LLC/Commonwealth of Pennsylvania Financing Authority)     
• Company Professionals:
  • Legal: Cozen O'Connor (Mark Felger, Keith Kleinman, Eric Scherling, Frederick Schmidt) 
  • Financial Advisor: Protiviti Inc. (Guy Davis)
  • Investment Banker: SSG Capital Advisors LLC (J. Scott Victor)
  • Claims Agent: Rust Consulting/Omni Bankruptcy (*click on company name above for free docket access)
• Other Parties in Interest:
  • DIP Lender: ROS Acquisition Offshore LP
    • Legal: Pachulski Stang Ziehl & Jones LLP (Laura Davis Jones, Jeffrey Davidson, Henry Kevane, Debra Grassgreen)
  • Senior Secured Convertible Noteholder: Amgen Inc.
    • Legal: Ropes & Gray LLP (James Wilton, Patricia Chen) & (local) Cole Schotz PC (Norman Pernick, Katharina Earle)
  • Large General Unsecured Creditor: Sanofi Winthrop Industrie
    • Legal: DLA Piper (US) LLP (Stuart Brown, Kaitlin Edelman)
  • Official Committee of Unsecured Creditors
    • Legal: Lowenstein Sandler LLP (Michael Etkin, David Banker, Barry Bazian, Gerald Bender) & (local) Schnader Harrison Segal & Lewis LLP (Richard Barkasy)

Updated 7/17/17