Church Street Health Management in Chapter 11, looks to sell assets

By Caroline Salls

Pittsburgh, Feb. 21 - Church Street Health Management, LLC filed Chapter 11 bankruptcy on Feb. 20 in the U.S. Bankruptcy Court for the Middle District of Tennessee.

Chief restructuring officer Martin McGahan said in a statement filed with the court that the Chapter 11 case was filed to facilitate a sale of substantially all of Church Street's operations and assets.

Specifically, McGahan said it is negotiating and finalizing an asset purchase agreement with a group led by Garrison Investment Group, which will serve as the stalking horse bidder. That agreement would be supported by most, if not all, of the company's senior lenders, the statement said.

The company said it hopes to file the sale motion and proposed bid procedures within the next few days. Church Street hopes to hold the auction by the week of April 9 and close the sale by April 30.

Investigations, negative press

McGahan said the investigations by governmental entities and negative news stories "placed an extraordinary burden on the company."

He said a Washington, D.C., area television investigative news report "was extraordinarily negative and suggested that [area] dental centers were providing services which were not medically necessary." The story was picked up by national media.

The CRO said Church Street spent millions of dollars to defend itself and its dental centers during governmental investigations.

The company agreed in January 2010 to pay $24 million to the Department of Justice and 22 states to bring an end to the investigations.

McGahan said the cost of complying with the settlement agreements, the additional staff and external professionals to improve its compliance programs and lawsuit and solicitation efforts "have been a significant drain on the company's resources."

DIP financing

In conjunction with the filing, the company has obtained a commitment for $12 million in debtor-in-possession financing.

Garrison Loan Agency Services, LLC is the administrative agent and collateral agent.

The facility will mature 90 days from the bankruptcy filing date, subject to one optional 30-day extension.

Interest will be Libor plus 900 basis points with a 1% Libor floor.

The company is seeking interim access to $5.5 million of the financing.

Debt details

According to court documents, Church Street has $895.3 million in total assets and $303.4 million of total debt.

The company's largest unsecured creditor is National Association of Medicaid Fraud Control Units, based in Washington, D.C., with a $10.71 million settlement claim.

The company is represented by Waller Lansden Dortch & Davis LLP.

Church Street is a Nashville-based dental practice management services company. The Chapter 11 case number is 12-01573.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.