Vanguard Healthcare committee balks at expense tied to proposed loan

By Caroline Salls

Pittsburgh, March 27 – Vanguard Healthcare, LLC’s official committee of unsecured creditors objected to the company’s motion to obtain a $2 million unsecured loan, calling the financing “an expensive way to satisfy administrative claims,” according to a March 27 filing with the U.S. Bankruptcy Court for the Middle District of Tennessee.

“In reality, because the amount of any loan obtained will be an administrative expense, the motion simply seeks at best to substitute one administrative expense for another, and at worst, to increase overall administrative expenses in these bankruptcy cases by another $2 million plus interest costs,” the committee said in the objection.

In addition, the committee said the lender’s willingness to accept repayment of this proposed loan over a five-year period is significant only if Vanguard’s Chapter 11 plan is confirmed over the objections of the committee and other creditors.”

Even then, the committee said the proposed loan is an expensive way to satisfy administrative claims, because the loan will require payment of at least $134,000 in upfront fees and additional interest payments of $700,000.

The committee also said the loan is not provided for in Vanguard’s plan, “and there is no provision for the repayment of interest or principal on account of the proposed new loan in the debtors’ financial projections.”

Additionally, the creditor group said the loan would not be necessary if Vanguard stopped making $560,000 per month in adequate protection payments to its secured lenders.

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

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