Investor-Owned Specialty Hospital Company
CRO Services and Sale of the Facilities
A chain of two inpatient rehabilitation hospitals in adjoining states defaulted on its debt with a large commercial lender and a privately held healthcare lender, and was ultimately forced into Chapter 11 liquidation. HMP was engaged as CRO in bankruptcy to manage the facilities and conduct the required Section 363 sale.
Issues
- Due to poor financial and operational mismanagement, the company faced immediate liquidation unless a sale could quickly be brokered.
- Overbuilt physical plant resulted in over-leveraged and unsustainable capital structure.
- Inexperienced management had been hired to develop a national company while at the same time overseeing the startup of a new facility located in a very competitive market.
- Development of competing nearby facilities resulted in key physician admitters splitting their practices with those other locations.
Approach
- Immediately secured DIP financing from the large commercial lender and established an agreed upon mechanism for accessing funds.
- Terminated remaining management and removed company owners from the facility.
- Initiated staff reductions and a hiring freeze, reviewed and approved all purchasing decisions.
- Compiled existing marketing materials and financial data for distribution to parties interested in potential acquisition of the hospitals.
- The CRO oversaw all marketing efforts to these potential purchasers. Debtor’s counsel, with support from the CRO, oversaw the auction and resulting negotiation and sale.
Results
- The two rehabilitation hospitals remained open through the completion of the sale and change of ownership, thereby insuring uninterrupted patient care, the maximum value to the secured and unsecured creditors and continued employment for the workforce.
- Full compliance with all state and federal regulatory issues throughout the transition.
- The sale was completed in less than four months from the date of filing for Chapter 11 bankruptcy.