Quorum Health pre-packaged reorganization plan effective as of July 7

By Caroline Salls

Pittsburgh, July 8 – Quorum Health Corp. completed its financial restructuring and emerged from Chapter 11 bankruptcy on Tuesday, according to a company news release.

As previously reported, Quorum’s pre-packaged plan of reorganization was confirmed by the U.S. Bankruptcy Court for the District of Delaware on June 30.

According to the release, Joey Jacobs has been appointed as chief executive officer of the reorganized company, and a new board of managers has been named.

The company said the reorganization gives it a stronger financial foundation, positioning Quorum, its affiliated hospitals and its management consulting business to continue serving its patients and clients. Quorum said it will move forward with a restructured balance sheet, having reduced debt by roughly $500 million.

Plan details

Quorum said previously that its plan is based on a restructuring support agreement reached with a majority of its term loan lenders and noteholders. 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 emerged with a 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 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 were to 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.

New board

Jacobs, who will also serve on Quorum’s board of managers, most recently served as chairman and CEO of Acadia Healthcare.

In addition to Jacobs’ appointment, Martin D. Smith is being promoted to president and chief operating officer. Alfred Lumsdaine will continue to serve as executive vice president and chief financial officer.

The reconstituted board of managers will be led by Nettleton Advisors president Catherine Klema.

Other board members include Davidson Kempner Hawthorne Partners LP operating partner Murtaza Ali, GoldenTree Asset Management senior research analyst Michael Rothbart, current Quorum board member Alice Schroeder, Woodbine Consulting, LLC managing member Andrew E. Schultz and Dan Slipkovich, who has more than 35 years of experience leading multi-billion-dollar hospital operations in senior leadership roles.

McDermott Will & Emery LLP and Wachtell, Lipton, Rosen & Katz served as the company’s legal counsel, MTS Health Partners, LP served as financial adviser and Alvarez & Marsal North America, LLC acted as restructuring adviser.

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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