Vanguard Healthcare creditors oppose plan, eye end to lender payments

By Caroline Salls

Pittsburgh, Feb. 15 – Vanguard Healthcare, LLC’s official committee of unsecured creditors asked the U.S. Bankruptcy Court for the Middle District of Tennessee to terminate monthly payments made to lenders in light of committee objections to Vanguard’s Chapter 11 plan, according to a motion filed Tuesday.

Specifically, the committee said it is asking the court to terminate any requirement that Vanguard make a payment of $560,000 per month to lenders, as well as to authorize the company to use cash collateral.

According to the motion, the lenders have received nine of these payments to date totaling $5.04 million.

The committee said the cash collateral orders give it the right to file a motion for termination of these payments if Vanguard’s proposed plan is not acceptable to the committee.

“The committee insisted upon the right to file a committee termination motion because the lenders are an over secured creditor that is not entitled to adequate protection payments,” the motion said.

The creditor group said it originally agreed to allow these payments only because it was told Vanguard could make these payments and still confirm quickly a plan of reorganization that would promptly pay allowed unsecured claims in full.

“Unfortunately, that has proven not to be true, and debtors desperately need the cash that is being paid monthly to the lenders, whose claims are substantially over secured,” the committee said.

The committee said the proposed plan “is extremely favorable to the lenders.”

Under the plan, the committee said the initial maturity of the lenders’ debt is extended for only a period of three years from the effective date, and interest is payable at a floating rate that increases if the maturity date is extended.

The committee said the lenders are also entitled to receive 80% of the gross proceeds obtained from any additional facility sales, as well as a share of proceeds from other sales and collections of some receivables.

“These provisions would be considered favorable to a secured lender in any bankruptcy case, but are extraordinary in this situation because the lenders’ claims are substantially over secured,” the motion said.

Meanwhile, the committee said the plan proposes to pay unsecured creditors nothing on the effective date. Instead, the committee said unsecured creditors are being asked to accept payment of their claims over an “unacceptably long period” of at least 7.5 years at a significantly lower interest rate than is being paid to an over secured creditor.

“The committee filed this motion in order to increase the amount of cash available to debtors’ estate,” the filing said.

“The committee believes that this cash and other cash available to debtors must be used in order to confirm a plan of reorganization that is fair and equitable with respect to its treatment of unsecured claims.”

Vanguard Healthcare is a Brentwood, Tenn., long-term care provider. The company filed bankruptcy on May 6, 2016 under Chapter 11 case number 16-03296.

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