Bankrupt prison health-care service provider Wellpath Holdings Inc. is attempting to improperly convert secured debt through a loan that would benefit some lenders at the expense of other creditors, the Department of Justice’s bankruptcy watchdog said.
Private equity-backed Wellpath filed Chapter 11 in November, citing escalating labor and legal costs.
The company lined up a $522 million bankruptcy financing loan, which includes a $417 million roll-up of existing debt to a higher tier of payment priority, the US Trustee told the US Bankruptcy Court for the Southern District of Texas in a Monday objection.
The “unreasonable and improper” loan ...
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