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Astria Health – The (Non-Extension) Extension: Court Grants Second Exclusivity Extension but Carves Out Major Stakeholders


December 5, 2019 – The Court hearing the Astria Health cases has extended (for a second time) the periods during which the Debtors have an exclusive right to file a Chapter 11 Plan, and solicit acceptances thereof, through and including January 31, 2020 and March 31, 2020, respectively [Docket No. 802]. Absent the requested relief, the Plan filing and solicitation periods expire on November 4, 2019 and January 3, 2020, respectively.

The order states, “…the Motion and the relief requested therein do not apply to JMB Capital Partners Lending, LLC; Lapis Advisers, LP; UMB Bank, N.A.; and the Official Committee of Unsecured Creditors (collectively, the ‘Exempt Parties’)….The Exclusive Periods have irrevocably expired with respect to the Exempt Parties and any one or more of such parties may file and seek confirmation of a plan or plans in these cases.”

Not much remains, therefore, of exclusivity; given that the Debtors' DIP lenders (JMB Capital), pre-petition lenders (Lapis Advisers and UMB Bank) and Creditors' Committee are carved out from the extension. 

Certainly too, stakeholders have voiced a level of displeasure as to the Debtors' Plan and their "rented management team" that would suggest the possibility of a competing Plan; with Lapis Advisers and UMB Bank expressing their dissatisfaction with both in an earlier DIP financing objection [Docket No. 48]: 

"But it is hard to overstate the extraordinary and unacceptable risks the Debtors’ strategy would impose on the Lenders and other stakeholders in these cases. There should be significant concern by the Court and all stakeholders whether the Debtors possess the needed resources to implement the Debtors’ standalone turnaround strategy. The Debtors and their rented managers (who stand to lose a lucrative management deal and opportunities to sell other services to the Debtors if the Chapter 11 Cases are not resolved through a standalone plan) would pin all of the enterprise risks of these cases on the Lenders and other creditors. The Debtors have already spent ten months and significant resources implementing their current billing and collection system. This experience alone raises significant doubt over the Debtors’ promises of a timely, successful correction. More concerning, the Debtors’ financial and other issues are longstanding; the Debtors have been in a nonstop turnaround mode for two years and the Chapter 11 Cases are only the latest in a series of challenges, many of them ongoing, that have hampered the Debtors’ business during their entire tenure as a hospital system.”

Debtors' Motion

The Debtors' extension motion [Docket No. 738] explained, “On September 13, 2019, the Court entered an order granting the Debtors’ application to retain Piper to serve as the investment banker to the Debtors and assist in, among other things, securing exit financing or a sale of same or all of the Debtors’ assets. [See Docket Nos. 394, 606]….Piper has also sent out ‘teasers’ and received numerous responses from entities interested in the process. In fact, approximately 40 interested parties have signed confidentiality agreements, requesting more information concerning the Debtors. While Piper has made progress towards securing a lender to provide exit financing to the Debtors, Piper will not obtain a commitment to provide exit financing prior to the expiration of exclusivity on November 4, 2019

Nevertheless, the Debtors are confident they will secure exit financing, sufficient to support a consensual plan of reorganization covering some, if not all, of the Debtors’ three Hospitals. If the Debtors are unable to secure such financing, the Debtors will be in a position to sell some or all of the Debtors’ assets as a vehicle to the plan process. To further ensure a positive outcome, the Debtors will soon file the Bid Procedure Motion to secure bids for some or all of the Debtors’ assets. The Bid Procedure Motion contemplates an expedited sale process and schedules the Sale Hearing for January 23, 2020. Thus, resolution of these Chapter 11 Cases will become clearer by the end of January, given that the Sale Hearing Date is set for January 23, 2020.

Further, since the last extension of the Exclusivity Periods, the Debtors have continued to work to improve operations. Among other things, the Debtors have adapted staff and contract services to respond to evolving market demands and conditions. The Debtors expect that during the proposed extension, it will make additional progress. Moreover, as discussed, the Debtors have retained Piper to assist in raising exit financing to refinance the Debtors’ debts at the conclusion of these Chapter 11 Cases or, alternatively, to obtain a sale of some or all of the Debtors’ assets for the benefit of creditors… Once the Debtors obtain exit financing, the Debtors believe they will be in a position to file a plan of reorganization. Otherwise, the Debtors will be well positioned to proceed with a sale as contemplated in the Bid Procedure Motion, which sets a Sale Hearing Date on January 23, 2020. However, the Debtors still need time to resolve and otherwise address Vendor-created issues.”

Further Background

On November 20, 2019, the Debtors filed a motion requesting each of a bidding procedures order and a sales order Docket No. 765]. 

The motion states, “The Debtors are pursuing an sale of some or all of their assets in recognition that refinancing may not be possible for some or all of the Debtors and that, absent setting a sale process in motion, the Debtors may not be able to execute a plan that provides for a successful resolution of these Chapter 11 Cases. Without approval of this Motion, the Debtors’ ability to fulfill their fiduciary obligations to their creditors could be seriously impaired.

The Debtors have suffered financial losses and operational difficulties in revenue cycle management as described in the First Day Declarations. The Debtors operate in a heavily regulated industry and have very tight working capital. Based on the present facts and circumstances of these Chapter 11 Cases, the Debtors have elected to pursue the sale of some or all of their Assets to maintain patient care for the benefit of the communities they serve, as well as to maximize the value of the estates and to maximize recoveries to creditors.

Although the Debtors are still pursuing exit financing to allow them to reorganize and confirm a plan of reorganization, they are mindful that they have an obligation to the community and their creditors to provide for alternative transactions should sufficient desired financing not become available.

The Debtors are undertaking an extensive marketing process to explore a sale of their Assets… The Debtors believe that the marketing and sale of some or all of the Assets pursuant to the Bid Procedures, along with pursuing exit financing options, presents the best opportunity to maintain the operations of the hospitals and maximize the value of the Assets for all interested parties.”

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The post Astria Health – The (Non-Extension) Extension: Court Grants Second Exclusivity Extension but Carves Out Major Stakeholders appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.

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