Hygea Holdings files bankruptcy, inks restructuring deal with lender

By Caroline Salls

Pittsburgh, Feb. 19 – Hygea Holdings Corp. filed Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the District of Delaware.

According to a statement filed with the court by chief executive officer and president Keith Collins, the Hygea debtors have faced liquidity challenges and operational issues since 2017 that threaten their ability to continue as a going concern.

Given these operational challenges, Collins said the Hygea debtors were never profitable on a cash basis and, therefore, were dependent on constant debt and equity fundraising activities to cover losses.

In addition, Collins said the company has been unable to raise additional capital to fund those losses partly because of pending litigation stemming from shareholder and contractual disputes.

“The debtors do not have the liquidity to defend or settle these lawsuits,” Collins said.

As a result, Hygea has been unable to service its debt obligations to lenders, and events of default have occurred under its credit agreement.

Collins said the company has negotiated a restructuring term sheet with lender Bridging Income Fund LP and lender agent Bridging Finance Inc.

Under a restructuring support agreement reached with Bridging, Hygea agreed to file bankruptcy and pursue a consensual restructuring to be implemented through a Chapter 11 plan, if possible, or a court-supervised sale process.

Collins said the company will file the proposed plan within 20 days.

The plan calls for the transfer of the Hygea debtors’ equity to the lender on account of its pre-bankruptcy secured claim, creation of a liquidating trust for the benefit of unsecured creditors and payment of priority tax claims, including outstanding payroll tax liability.

To the extent the plan process is unsuccessful, the restructuring term sheet provides for a sale of substantially all of Hygea’s assets, with Bridging agreeing to credit bid all or a portion of its secured debt.

Bridging has agreed to provide Hygea with $9.98 million in debtor-in-possession financing to support the administrative and operational expenses of the Chapter 11 cases.

The facility will mature on the earliest of June 15, the effective date of a Chapter 11 plan, closing of a sale of all or substantially all of the debtors’ assets and acceleration of the DIP loan following occurrence of an event of default.

Interest will accrue at a rate of Libor plus 800 basis points.

A total of $1.74 million of the financing will be available on an interim basis.

According to court documents, Hygea has $77.3 million in assets and $212.2 million in debt.

Cole Schotz PC is representing Hygea in its bankruptcy proceedings.

Hygea is a Miami-based company focused on the delivery of primary-care-based health care to commercial, Medicare and Medicaid patients. The Chapter 11 case number is 20-10361.

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