Quorum Health plan confirmed by court; early July emergence expected

By Caroline Salls

Pittsburgh, June 29 – Quorum Health Corp. received approval from the U.S. Bankruptcy Court for the District of Delaware of its pre-packaged plan to recapitalize the business, according to a company news release.

Quorum said the decision paves the way for it to complete its financial reorganization and successfully emerge from Chapter 11. The final order is expected to be entered soon, and the company said it expects to emerge from bankruptcy in early July.

“We are pleased to reach this important milestone, which allows our company to begin a new chapter with the flexibility and resources to continue supporting our community hospitals as they serve on the frontlines of this pandemic and beyond,” executive vice president and chief operating officer Marty Smith said in the release.

“We are grateful for the confidence of our financial stakeholders and partners, as well as our dedicated employees and physicians, and look forward to building on the significant progress we have made in strengthening our operations in recent years.”

As previously reported, Quorum’s plan is based on a restructuring support agreement reached with a majority of its term loan lenders and noteholders and is designed to recapitalize its business and significantly reduce the size and cost of the company’s debt, cutting debt by roughly $500 million.

The parties to the restructuring support agreement include a majority of first-lien lenders and holders of at least two-thirds of the total outstanding principal amount of the company’s $400 million of 11 5/8% senior notes due 2023.

Under the plan, Quorum will emerge from bankruptcy with a leaner capital structure comprised of a senior secured asset-based revolving credit facility and a senior secured term loan facility in a total principal amount of $738.3 million, minus an exit facility paydown amount of at least $50 million but no more than $100 million, as determined by the holders of at least 50% of the commitment amounts of all parties party to an equity commitment agreement.

Holders of ABL credit agreement claims will be paid in full in cash.

Senior noteholders will have their claims discharged, terminated and released in exchange for 100% of the new common stock of reorganized Quorum Health, subject to dilution for specified issuances of new common stock, and beneficial interests in a litigation trust.

The company said the plan requires establishment of the litigation trust for the benefit of the senior noteholders. Quorum will contribute specified causes of action that it has or acquires after the bankruptcy filing date to the trust.

General unsecured claims will be paid in the ordinary course.

All outstanding shares and restricted stock units will be cancelled, and holders will receive no recovery.

The plan also calls for the adoption of a management incentive plan on or after the effective date under which shares of new common stock or other securities will be reserved for grants to management, key employees and directors of the reorganized company.

Quorum Health is a Brentwood, Tenn.-based operator and manager of general acute care hospitals and outpatient services. The company filed bankruptcy on April 7 under Chapter 11 case number 20-10766.

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