December 30, 2022 – Further to the Court's revised bidding procedures order of October 6th [Docket No. 1287], the Debtor notified the Court that SAM Real Estate, LLC* had been designated as the stalking horse bidder (the “Stalking Horse Bidder,” $20mn bid) in respect of the sale of Debtor's MTPC, LLC assets (ie its Nashville, TN Proton Therapy Center) [Docket No. 1431, with the Stalking Horse Bidder's APA attached at Schedule 1].
*The Stalking Horse Bidder is an affiliate of Nashville, Tennessee-based Sable Investments.
Case Status
On December 16, 2020, MTPC, LLC and two affiliated Debtors*, together the operator of three full-service proton therapy and cancer-treatment centers, filed for Chapter 11 protection noting estimated assets between $50.0mn and $100.0mn; and estimated liabilities between $100.0mn and $500.0mn.
* At filing, the Debtors operated three full-service proton therapy and cancer-treatment centers, with each of the three Debtors operating a separate treatment center, namely:
- MTPC, LLC d/b/a Provision CARES Proton Therapy Center Nashville, (“MTPC”);
- The Proton Therapy Center, LLC d/b/a Provision CARES Proton Therapy Center Knoxville, (“PCPTK”); and
- PCPT Hamlin, LLC d/b/a Provision CARES Proton Therapy Center Orlando, a limited liability company organized under the laws of Florida (“PCPT Hamlin”)
The need to seek bankruptcy protection followed an inability to roll-out of revenue generating services at their centers (only two completed) at a pace that could keep up with their debt servicing obligations. Struggling with chronic liquidity issues, the Debtors also experienced lower than expected Medicare reimbursement rates and occupancy rates…topped off by COVID-19 (which served to scare off prospective clients) and a cyberattack.
On January 24, 2022, further to an earlier August 27th bidding procedures order [Docket No. 675] and auctions held on November 30th and December 1st, the Court hearing the MTPC cases issued a trio of sale orders approving the sale of: (i) the Debtors’ PCPTK’s assets to Covenant Health for a purchase price of $42.25mn, (ii) the Debtors’ MTPC Assets to Provision Trust, Inc. for a purchase price of $26.5mn and (iii) the Debtors’ PCPT Hamlin Assets to Provision Trust, Inc for a purchase price of $15.5mn [Docket Nos. 997, 998 and 999, respectively, with each of the sale orders attaching the relevant APA].
On February 28, 2022, Provision Trust failed to close the proposed sales by the required closing date.
On May 29, 2022, the Selling Debtors filed a notice terminating the asset purchase agreements between Provision Trust and MTPC and Provision Trust and PCPT Hamlin and advised the central stakeholders in the Chapter 11 Cases that it would recommence the marketing process as to each.
On July 19, 2022, the sale of the PCPTK Debtor's assets to Covenant Health closed.
The Re-Booted Sale Process
On October 6, 2022, the Court hearing the MTPC cases issued a revised bidding procedures order in respect of the Debtors' MTPC Assets and PCPT Hamlin Assets* which (i) approved bidding procedures in respect of the sale of those two asset groupings and (ii) authorized the Debtors to select one or more stalking horse bidders and offer bid protections to any selected stalking horse (none selected yet) [Docket No. 1287].
The re-booted sale process follows the collapse of earlier, Court-approved sales of each of the MTPC Assets and PCPT Hamlin Assets to Provision Trust with the Debtors terminating agreed asset purchase agreements on May 29th after Provision Trust failed to close on the sales by a longstop closing date. The $42.25mn sale of a third asset group, the Debtors' PCPTK’s assets, to Covenant Health was successfully completed.
The revised bidding procedures motion [Docket No. 1266] notes, “Certain parties interested in the assets offered for sale by the Selling Debtors requested clarity from the Selling Debtors that certain Court-approved bid procedures and protections governed the process run by the Selling Debtors to sell their assets. As such, the Selling Debtors are filing this Motion and seeking approval of bid procedures similar to the bid procedures the Court already approved (‘Bid Procedures I’) in Docket No. 675 (the ‘Bid Procedures Order I’) to provide that clarity to such interested parties. The Selling Debtors believe that entry of an order will accelerate the sale process run by the Selling Debtors and their eventual exit from chapter 11, which the Selling Debtors and their advisors believe is necessary to maximize value (and minimize expense) for the benefit of all stakeholders.”
Notably, the revised bidding procedures motion seeks Court approval to pay an expense reimbursement up to $300,000 in the aggregate (the 'Expense Reimbursement') to compensate for reasonable and documented out-of-pocket fees and expenses of any Stalking Horse Bidder, a reduction from the previously approved $500k Expense Reimbursement in Bid Procedures I. The Debtors are also seeking Court approval to pay a breakup fee (the 'Breakup Fee' and together with the Expense Reimbursement, the 'Bid Protections'); provided, however, that with respect to any particular Stalking Horse APA, (i) the total Breakup Fee may not exceed 3.0% of the cash purchase price contemplated by such Stalking Horse APA, and (ii) the total Bid Protections may not exceed four percent (4.0%) of the cash purchase price.
General Background
On December 16, 2020, MTPC, LLC and two affiliated Debtors, together the operator of three full-service proton therapy and cancer-treatment centers, filed for Chapter 11 protection noting estimated assets between $50.0mn and $100.0mn; and estimated liabilities between $100.0mn and $500.0mn.
The need to seek bankruptcy protection followed an inability to roll-out of revenue generating services at their centers (only two completed) at a pace that could keep up with their debt servicing obligations. Struggling with chronic liquidity issues, the Debtors also experienced lower than expected Medicare reimbursement rates and occupancy rates…topped off by COVID-19 (which served to scare off prospective clients) and a cyberattack.
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Andrews Declaration”) [Docket No. 15], Mark Andrews, the Debtors’ Chief Restructuring Officer, detailed the events leading to the Debtors’ Chapter 11 filings. The Andrews Declaration details Debtors hit by liquidity concerns from the outset, with the pace of development of their three centers and their ability to roll-out of revenue generating services always a step behind their debt servicing obligations.
Once online (only two of the three facilities, one operated by each of the three Debtors, are completed), the Debtors suffered from lower than expected Medicare reimbursement rates and occupancy rates; with declining revenues further exacerbated by COVID-19 (which served to scare off prospective clients) and a cyberattack. The tightening liquidity noose of course an unvirtuous cycle leaving the Debtors with damaged vendors relationships; unpaid bondholders and senior lenders; and without the funds necessary to get their third facility (the Orlando-based PCPT Hamlin) operational.
The Andrews Declaration provides: “PCPTK was the first proton therapy cancer treatment center in Tennessee, second in the Southeast, and 13th in the nation. Building on the success of the PCPTK, MTPC established a proton therapy cancer treatment center in Nashville in 2018. PCPT Hamlin has been constructing a proton therapy center in the Hamlin community, just outside of Orlando, Florida, since December, 2018.
Due to financial difficulties, PCPT Hamlin has been unable to secure the majority of the equipment necessary to complete its proton therapy center. It is uncertain when the Hamlin proton therapy center will be operational.
From the beginning, the Debtors experienced difficulties in meeting their obligations.
As of the Petition Date, there was approximately $108.8 million in principal amount outstanding on the Series 2014 Knoxville Bonds. As of the Petition Date, there was approximately $113.7 million in principal amount outstanding on the Secured Series 2017 Nashville Bonds; approximately $5.0 million in principal amount outstanding on the Subordinate Series 2017 Nashville Bonds; and approximately $5.0 million in principal amount outstanding on the Unsecured Series 2017 Nashville Bonds.
As of the Petition Date, there was approximately $135.5 million in principal amount outstanding on the Series 2018 Orlando Bonds, spilt between Senior Secured Notes of $125.5 million and Subordinated Notes of $10.0 million.
Due to lower than projected [Medicare] reimbursement rates and patient volume, PCPTK and MTPC have not been able to service the bond debt and have also been essentially relying on a subsidy of credit terms from the Service Providers. As a result, the Service Providers built up a receivable of $10.4 million from PCPTK and MTPC. That caused the Service Providers to have difficulty paying their own vendors, including their primary lender, ServisFirst Bank. While the Centers were stretched, they kept paying the bondholders current until November 2019. Shortly thereafter matters worsened. COVID made patients reluctant to seek diagnosis or treatments. At PCPTK, the patient count went down from a daily total of 66 to 47, and PCPTK’s earnings dropped from $2,045,751 to $1,486,416 on a monthly basis. At MTPC, the patient count went down from a daily total of 43 to 24, and MTPC’s earnings dropped from $1,598,549 to $895,771 on a monthly basis.
Adding to these difficulties, the Centers were hit with a cyberattack in late October 2020, crippling their essential computer systems and financial-reporting capabilities. That attack rendered some data temporarily inaccessible, amplifying an already tight cash situation.
PCPT Hamlin has suffered, too. It was under construction during this period, and its progress payments fell short of what was required to complete the entire equipment list. While the building is substantially complete and has a certificate of occupancy, the equipment installation and fabrication is not yet complete.”
About the Debtors
According to the Andrews Declaration: "The Debtors are non-profit companies, two are operating individually as full-service proton therapy and cancer-treatment centers, and one is being developed as the same. As non-profit companies, the Debtors are devoted to the health and well-being of their regional communities by providing exceptional care to their patients. The Debtors have provided, collectively, more than 100,000 treatments since they opened their doors.
Each Debtor is a limited liability company. Two operate full-service proton therapy and cancer-treatment centers, and one is developing a full-service proton-therapy and cancer-treatment center. MTPC operates the facility in Nashville, Tennessee. PCPTK operates the facility in Knoxville, Tennessee, and PCPT Hamlin is developing the facility in Winter Park (Hamlin), Florida. The Debtors operate vertically-integrated companies in cancer care with connections between the cancer-care provider, systems and technology, operator, and developer (noting that the facility operated by PCPTK utilizes a treatment system from a third party, IBA).
PCPTK was the first proton therapy cancer treatment center in Tennessee, second in the Southeast, and 13th in the nation. Building on the success of the PCPTK, MTPC established a proton therapy cancer treatment center in Nashville in 2018. PCPT Hamlin has been constructing a proton therapy center in the Hamlin community, just outside of Orlando, Florida, since December, 2018."
As to what proton therapy actually is, the Declaration continues: "The Debtors employ a next-generation proton-therapy system using external beam radiotherapy along with innovative healthcare solutions focused on improving patient care and clinical outcomes for cancer patients. Conventional x-ray therapy deposits energy along the entire path of the beam when entering and exiting the tumor site, which damages healthy organs and tissues of a patient. The proton therapy provided by the Debtors is non-invasive treatment that precisely targets cancerous and non-cancerous tumors and reduces the risk of side effects to surrounding healthy tissue. 19.The Debtors use the most precise form of proton therapy, called “Pencil Beam Scanning,” which allows physicians to target the tumor area with the highest radiation dose by a proton beam only millimeters wide, thus controlling both the depth and the position of the beam, and planning the exact point at which the proton beam stops inside the body. This allows doctors to spare healthy organs and bodily tissue from unnecessary radiation exposure while treating tumors and diseased tissue. This approach has been shown to improve the quality of life for patients both during and after treatment and may lead to reduced patient side effects, fewer patient treatments, improved local cancer control, and improved quality of life for the patient, and shorter treatment times.
Corporate Structure Chart
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