OCA files for Chapter 11

New York, March 15 - OCA, Inc. filed for Chapter 11 Tuesday in the U.S. Bankruptcy Court for the Eastern District of Louisiana.

The company said the move would give it "breathing room" to restructure its balance sheet and operations.

OCA, a Metairie, La., provider of business services to orthodontic and dental practices, said the bankruptcy filing was triggered by an increase in the number of affiliated practices defaulting on their agreements. Unable to stop the flow, OCA said its revenues have "substantially decreased."

Revenue was $359.3 million for 2005 and EBITDA was $22.8 million.

Under the agreements, OCA typically capital for the growth of practices and manages the business to allow the practitioners to focus on delivering care. Generally OCA buys the furniture, fixtures and equipment and makes leasehold improvements to the offices. It also employs the staff. In total it has invested $400 million and now employs 2,300 staff.

In its Chapter 11 filing, OCA listed assets of $545.220 million and liabilities of $196.337 million.

The company has a credit agreement via administrative agent Bank of America including a term loan with an original principal amount of $25 million and a $100 million revolver. At the time of filing for bankruptcy, OCA owed $91.7 million.

The largest unsecured claim was listed as $597,000 owed to Applied Discovery, Inc. of Bellevue, Wash.

Nightwatch Capital Management owns 5.4% of the stock and Dimensional Fund Advisors owns 7.13%.

OCA requested the bankruptcy court to approve a debtor-in-possession facility. On an interim basis the agreement would include a revolver of $3 million in the first week and $7 million in the second week. The final DIP would include a $15 million revolver and a $91.7 million term loan, $85 million to be drawn immediately and $16.7 million delayed draw.

Proceeds will be used for working capital and general corporate purposes. The final $91.7 million term loan will be used to refinance the pre-bankruptcy bank borrowings.

Silver Point Finance, LLC will be arranger for the DIP facility while Bank of America will be administrative and collateral agent.

Interest on the revolver will be at Prime plus 250 basis points. The term loan will be at Prime plus 350 basis points.

The unused fee is 75 basis points. A facility fee of 150 basis points is payable for the revolver on closing.

Maturity is six months unless OCA exits Chapter 11 earlier.

The case number is 06-10179.

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