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Florida Cancer Care Firm Files Chapter 11, Morgan Stanley Agents DIP

May 26, 2017, 07:45 AM
Filed Under: Bankruptcy

21st Century Oncology Holdings, Inc., a global provider of integrated cancer care services, announced that it has reached an agreement in principle with its senior lenders and bondholders on the terms of a comprehensive debt restructuring that is expected to reduce the Company’s long-term net debt by more than $500 million, including a new cash equity infusion of $75 million from a group of investors. Once implemented, the debt restructuring will improve the Company’s financial flexibility and enhance its ability to work with its physician and hospital partners in providing the best medical healthcare for patients.

“This is a positive development for 21st Century Oncology and our employees, healthcare partners and the patients who depend on our critical medical services,” said Paul Rundell, the Company’s Interim Chief Executive Officer. “We are a fundamentally strong and profitable business; however, we simply have too much debt given the size of the business and the way industry dynamics, particularly the challenging reimbursement environment, have affected our ability to maximize revenue in the aftermath of these unprecedented, ongoing changes. As a result, in recent months we have been engaged in discussions with our key creditors to reduce our overall debt level. We are encouraged by the progress we’ve made in these advanced discussions and are optimistic that we can finalize the restructuring agreement in short order. We expect it to form the basis of a consensual Plan of Reorganization that gives us the necessary flexibility to make investments that will allow us to remain at the forefront of patient care, which is always our top priority.

The parties intend to implement the balance sheet restructuring through a Chapter 11 process and today 21st CO and certain of its U.S. affiliates filed voluntary Chapter 11 petitions to restructure in the U.S. Bankruptcy Court in the Southern District of New York (the “Court”). The Company’s non-U.S. subsidiaries were not included in the filing and are unaffected by the Chapter 11 process.

During the Chapter 11 process the Company expects to operate its business in the ordinary course, without disruption, and patients can be assured that there will be no change in the way they are treated. Treatment facilities remain open and are operating on normal schedules, and patients’ appointments, treatment schedules and physician partners remain the same.

“Operationally, very little, if anything, should change during the Chapter 11 process,” said Rundell. “Our ability to continue to operate as usual and have no disruption to patients was a critical factor in our decision to use Chapter 11 to implement this debt restructuring.”

As a routine matter, 21st CO has asked the Court to approve the payment of all employee wages, salaries and benefits in the ordinary course of business and expects the Court to approve this request as soon as possible, ensuring that employees will be paid and benefits will continue without delay.

“The 21st Century Oncology executive management team and our Board of Directors appreciate the dedication and hard work of our employees and our physician, hospital and joint venture partners,” said Rundell. “We will always be committed to providing the best care possible to patients, and the continued loyalty of our employees and healthcare partners is critical to the long-term success of the Company. I also would like to thank our vendors and suppliers for their continued support during this process.”

In conjunction with the Chapter 11 filing, certain of 21st CO’s senior lenders have committed to provide up to $75 million in working capital through debtor-in-possession (DIP) financing. Upon approval by the Bankruptcy Court, the DIP facility, together with the Company’s available cash reserves and cash provided by operations, is expected to provide sufficient liquidity for the Company to continue operating its business without interruption and to meet its obligations. Upon emergence from the Chapter 11 process and subject to certain conditions, certain of 21st CO’s creditors will contribute $75 million of cash equity in the reorganized company. This new cash infusion will be used by the Company to pay off any borrowings under the DIP facility in full and any remaining cash will be used for general corporate purposes.

According to court documents, Morgan Stanley Senior Funding, Inc. served as administrative agent, collateral agent, issuing bank, and swingline lender.

“This equity commitment by our senior lenders demonstrates their confidence in our business and potential for future success,” said Rundell. “We believe we are taking the necessary steps to allow the Company to invest in key business initiatives and drive future growth. In addition to improving our capital structure, we intend to use the Chapter 11 process to resolve certain legacy litigation liabilities that have been a source of uncertainty. We are confident that this restructuring will be successful and provide us with a fresh start financially and the opportunity to fully focus on our mission of delivering the best healthcare possible to more patients.”


Millstein & Co. is acting as financial advisor to 21st CO and Alvarez & Marsal Healthcare Industry Group is acting as interim senior management. Kirkland & Ellis is acting as the Company’s legal counsel in connection with the debt restructuring.



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