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Center City Healthcare, LLC – Files Plan of Liquidation and Disclosure Statement That Incorporates Settlement of ‘Numerous Inter-Debtor Issues’

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December 31, 2020 – The Debtors filed their Plan of Liquidation and related Disclosure Statement [Docket Nos. 2001 and 2002, respectively].

The filing of the Plan and Disclosure Statement comes approximately 18 months after the Debtors filed for Chapter 11 on June 30, 2019. According to an exclusivity extension motion filed on October 21, 2020 [Docket No. 1839], the Debtors pushed back the bar date in these cases by several months to account for any Covid-related challenges that might have kept creditors from submitting claims in a timely fashion. Now that the August 5th Bar Date has passed, the Debtors said they are working through more than 2,500 claims "totaling over $1 billion." In addition, the motion stated that it was working with the Official Committee of Unsecured Creditors to identify "potentially significant" estate claims and causes of action.

The Disclosure Statement explains, "The Plan provides that pursuant to section 1123 of the Bankruptcy Code and Bankruptcy Rule 9019, the Plan incorporates a compromise and settlement of numerous inter-Debtor issues. The Plan is designed to achieve an economic settlement of Claims against the Debtors and an efficient, just and equitable resolution of these Chapter 11 Cases. This global settlement constitutes a settlement of a number of potential litigation issues, including issues regarding substantive consolidation between and among the Debtors, the validity and enforceability of Intercompany Claims, the allocation of borrowings (and use of such borrowings) from the DIP Agent and from the Debtors’ pre-Petition Date lenders and the allocation of expenses and sale proceeds among the Debtors’ Estates. The entry of the Confirmation Order will constitute the Bankruptcy Court’s approval of each of the foregoing compromises or settlements and all other compromises and settlements provided for in the Plan….

The Plan provides that the Debtors’ Representative will be Allen Wilen…The Plan provides that the Debtors’ Representative will administer the Plan and serve as a representative of the Debtors’ Estates under section 1123(b) of the Bankruptcy Code for the purpose of enforcing Causes of Action."

The following is a summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement):

  • Class 1 (“Priority Non-Tax Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
  • Class 2 (“Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
  • Class 2/MidCap (“Secured Lender Claims”) is unimpaired and not entitled to vote on the Plan.
  • Class 3A (“Convenience Claims”) is impaired and entitled to vote on the Plan. Each Holder will receive from the Convenience Claims Reserve, on or as soon as is practicable after the later of (i) the Effective Date or (ii) the date on which the Holder’s Convenience Class Claim is Allowed by Final Order, Cash in the amount of [___%] of the Allowed Amount of such Holder’s Convenience Class Claim.
  • Class 3B (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. Treatment: 
    • (a) On the Initial Distribution Date, if a Class 3B General Unsecured Claim or Class 3C HSRE Claim is Allowed at least thirty (30) days prior to the Initial Distribution Date, the Holder of such Claim will receive from the Debtors’ Distribution Account, Cash equal to (i) the amount of its Class 3B General Unsecured Claim or Class 3C HSRE Claim, as applicable, multiplied by (ii) the Initial Distribution Percentage.
    • (b) On each Subsequent Distribution Date, if a Class 3B General Unsecured Claim or Class 3C HSRE Claim is Allowed at least thirty (30) days prior to such Subsequent Distribution Date, the Holder of such Claim will receive from the Debtors’ Distribution Account (i) a Catch-Up Distribution, if applicable, and (ii) Cash equal to (a) the amount of its Class 3B General Unsecured Claim or Class 3C HSRE Claim, as applicable, multiplied by (b) the then-current Interim Distribution Percentage.
    • (c) On the Final Distribution Date, each Holder of a Class 3B General Unsecured Claim and Class 3C HSRE Claim will receive from the Debtors’ Distribution Account (i) a Catch-Up Distribution, if applicable, and (ii) Cash equal to (a) the amount of its Class 3B General Unsecured Claim or Class 3C HSRE Claim, as applicable, multiplied by (b) the Final Distribution Percentage.
  • Class 3C (“HSRE Claims”) is impaired and entitled to vote on the Plan. Treatment: Unless subordinated, Class 3C HSRE Claims will receive the same treatment under the Plan as Class 3B General Unsecured Claims.
  • Class 3D (“Insider Claims”) is impaired and entitled to vote on the Plan. Class 3D Insider Claims are subordinated to Class 3A Convenience Claims, Class 3B General Unsecured Claims and Class 3C HSRE Claims. Upon the prior payment of 100% of each Class 3B General Unsecured Claim and each Class 3C HSRE Claim in accordance with the Plan, the Holders of Insider Claims will receive a pro rata distribution of all Cash Available for Distribution that has not been distributed to Holders of Class 3B General Unsecured Claims or Holders of Class 3C HSRE Claims; provided, however, that no Holder of a Class 3D Insider Claim will be entitled to receive Cash under the Plan in excess of 100% of such Holder’s Class 3D Insider Claim.
  • Class 4 (“Interests”) is impaired, deemed to reject and not entitled to vote on the Plan.

Key Documents

The Disclosure Statement [Docket No. 2002] attaches the following exhibits:

  • Exhibit A: Debtors’ Chapter 11 Plan of Liquidation
  • Exhibit B: Estimated Range of General Unsecured Claims
  • Exhibit C: Ownership Structure

Background

STC Sale

On September 27, 2019, the Court approved the $50.0mn sale of substantially all of the Debtors’ St. Christopher’s Healthcare LLC (“SCH”) assets to STC OpCo, LLC (the “Purchaser,” a company formed by Drexel University and Tower Health to acquire those assets) [Docket No. 795]. The asset purchase agreement (the “SCH APA,” which is attached to the order as Exhibit A) is signed by Clint Matthews who is the President and CEO of Tower Health.

On September 20th, the Debtors notified the Court that the auction scheduled for September 18, 2019 had been cancelled and the Purchaser designated as the successful bidder in respect of the SCH assets [Docket No. 753].

On September 10, 2019 and further to an auction held on August 8, 2019, the Court approved a separate $54.0mn (or $55.0mn, with inclusion of certain resident liability insurance costs) sale of the Debtors’ residency program assets to Thomas Jefferson University Hospitals, Inc. [Docket No. 681].

Residency Program Sale

On September 10, 2019, the Court approved a $54.0mn (or $55.0mn, with inclusion of certain resident liability insurance costs) sale of the Debtors' residency assets to Thomas Jefferson University Hospitals, Inc. (the “Purchaser”) [Docket No. 681]. The asset purchase agreement (the "APA") governing the terms of the sale is attached to the order. Critical to the Debtors in this sale was their ability to fund and continue liability insurance for their residents from January 1, 2018 until the end of their respective employments at Hahnemann University Hospital.

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The post Center City Healthcare, LLC – Files Plan of Liquidation and Disclosure Statement That Incorporates Settlement of ‘Numerous Inter-Debtor Issues’ appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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