Pipeline Health’s modified Chapter 11 plan confirmed by court

By Sarah Lizee

Olympia, Wash., Jan. 13 – Pipeline Health System, LLC’s recently modified Chapter 11 plan gained confirmation from the U.S. Bankruptcy Court for the Southern District of Texas on Friday, according to an order.

The voting classes voted unanimously in favor of the plan.

Following negotiations between the debtor, lenders and the official committee of unsecured creditors, changes were made to the plan before the Friday hearing.

The amended pre-packaged Chapter 11 plan aims to deleverage the company’s balance sheet by eliminating over $275 million in funded debt and over $55 million in unsecured liabilities.

Under the plan, asset-based facility claims are allowed in the amount of roughly $20.6 million. The ABL lenders have agreed to consensually impair their prepetition secured claims and commit new funds to the debtors in the form of a $55 million exit facility. Interest on the facility is SOFR plus 475 basis points. Credit Suisse AG, New York Branch is the agent.

The debtor-in-possession lenders have agreed to roll a portion of their DIP claims into a takeback facility instead of being paid in cash. Acquiom Agency Services LLC is the agent on the takeback facility, which will bear interest at SOFR plus 650 basis points and mature Jan. 31, 2026.

DIP lenders have also agreed to equitize some of their claims as part of the deleveraging of the debtors’ prepetition capital structure.

Term loan claims are allowed in the amount of at least $257.66 million. Holders will receive their pro rata share of an equitization pool on account of their claims.

General unsecured claims will be discharged and released with no distribution on account of those claims.

The debtors and committee have negotiated a preference waiver and a commitment by the debtors to increase the budget with respect to the total amount available to satisfy claims arising under bankruptcy code section 503(b)(9) and cure claims to a total amount of $12.25 million.

The plan contemplates paying allowed administrative and priority claims in full.

Holders of other secured claims will receive payment in full in cash, reinstatement of their claims, or other treatment leaving the claims unimpaired.

Holders of other priority claims will receive payment in full in cash or other treatment leaving the claims unimpaired.

Holders of intercompany claims will receive no distribution.

Intercompany interests will be reinstated, distributed, contributed, set off, settled, canceled and released, or otherwise addressed.

Holders of existing parent interests and section 510(b) claims will not receive any distribution.

The plan also consensually resolves the legal issues with the MPT parties and contemplates amending the lease for the debtors’ California facilities to provide meaningful liquidity.

The debtors also agreed to certain payment plans with government payors to enable them to continue to participate in government programs while satisfying certain obligations to such programs, totaling about $18.4 million, over multi-year terms.

The debtors have also worked with numerous trade vendors to consensually resolve cure-related objections on terms favorable to the company.

They have also restructured contract obligations with their existing electronic medical records service provider and transitioned to a lower-cost alternative, thereby realizing about $15 million in savings per year.

Pipeline Health System is an El Segundo, Calif.-based community-focused health care network. It filed bankruptcy on Oct. 2 under Chapter 11 case number 22-90291.

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