The health-care chain cut a deal with its lenders to slash debt by about $500 million through a Chapter 11 filing, according to a
Under the plan, noteholders owed $400 million would get 100% of the equity in the reorganized hospital chain, wiping out existing shareowners. Some noteholders, including Davidson Kempner Partners,
The company has struggled since it was created in 2016 through a spinoff of 38 hospitals from
“Since day one post spin, Quorum’s earnings base has never been able to support its capital structure,” Bloomberg Intelligence analyst
The chain’s bankruptcy may mark the start of massive woes for American hospitals, especially in less populated areas like the ones served by Quorum. Even before the coronavirus hit, hospitals were losing profitable elective procedures to outpatient facilities, while still handling emergencies and walk-ins who lack good insurance.
Now as medical centers cancel optional treatments to spare resources for coronavirus victims, their slim revenue margins are being further squeezed, and federal relief may not be quick or abundant enough to save them. More than 30 facilities went bankrupt last year.
Quorum recently acknowledged in a regulatory filing that bankruptcy was possible. “Regardless of the path forward the company chooses, Quorum Health and its hospitals will continue to maintain all operations without any interruption to service,” Chief Executive Officer
Quorum hasn’t posted an
KKR in December told Quorum it was willing to lead a recapitalization that would restructure the company’s debt load and pay shareholders $1 per share. In March, KKR said such a buyout seemed off the table and that, if there was to be a deal, it would likely come with little or nothing for equity investors. The stock, which topped $17 in 2016, has recently traded for less than 50 cents.
The company listed assets of about $373 million and debts of more than $1.2 billion in it bankruptcy petition in Delaware.
The case is Quorum Health Corporation,
(Updates ownership changes in the third paragraph.)
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