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Cano Health Enters Restructuring Support Agreement with Significant Majority of Lenders

February 05, 2024, 07:38 AM
Filed Under: Bankruptcy

Cano Health, a leading value-based primary care provider and population health company, has entered into a Restructuring Support Agreement (the "RSA") with lenders (the "Ad Hoc Lender Group") holding approximately 86% of its secured revolving and term loan debt and 92% of its senior unsecured notes. This agreement enables Cano Health to substantially reduce its debt and position the Company to achieve long-term success.

To facilitate this restructuring, Cano Health has initiated prearranged voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware (the "Court"). It has also received a commitment for $150 million in new debtor-in-possession financing from certain of its existing secured lenders, which is subject to Court approval. This new capital is expected to provide sufficient liquidity to support the Company's ongoing operations throughout the restructuring process.

Mark Kent, CEO of Cano Health, said, "We have taken decisive actions over the past few months to advance our previously disclosed Transformation Plan and strengthen our financial position. By entering this court-supervised restructuring process, we are positioning the Company to achieve those goals on an accelerated basis and focus on what we do best – improving health outcomes for patients at a lower cost. I am confident we will emerge from this process a stronger organization with the necessary resources in place to continue delivering the quality of care our patients expect and deserve. We appreciate the support of the majority of our creditors as we pursue this goal."

Since Mark Kent assumed the permanent CEO role in August 2023, Cano Health has significantly advanced and accelerated its strategy to focus on its core Florida Medicare Advantage and ACO REACH lines of business, including successfully divesting operations in Texas and Nevada and exiting the California and Puerto Rico markets. As a result of its ongoing operational Transformation Plan, the Company expects to achieve approximately $290 million of annualized cost reductions by the end of 2024.

Cano Health is filing with the Court a series of customary "first day" motions to maintain business-as-usual operations on all fronts:

  • Paying associate wages, including for its doctors and nurses, without interruption;
  • Continuing operations and honoring obligations to its affiliate physician groups;
  • Ensuring patients at its clinics continue to receive quality value-based healthcare; and
  • Seeking authority to pay the existing pre-petition claims of certain vendors that are critical to the health and safety of Cano Health's patients and critical to the operation of the Company's medical centers. The Company has authority to continue making ordinary course payments for all authorized goods and services provided on or after the filing date.
  • Court approval of these routine motions, which the Company expects to receive in short order, will help facilitate a smooth transition into the process and ensure the Company's medical centers and its physician affiliates can continue providing uninterrupted service to all patients.

Given the broad extent of creditor support, Cano Health expects to file and receive Court approval of a Plan of Reorganization and Disclosure Statement expeditiously, while also exploring paths to maximize value, and it expects to emerge from the restructuring process in the second quarter of 2024.

The RSA provides for the conversion of nearly $1 billion in secured debt to a combination of new debt and full equity ownership in the reorganized company. It also allows for solicitation of strategic partnerships and potential offers ­– including the sale of the company or substantially all its assets – that may result in a value-maximizing outcome to the Company's stakeholders.

Weil, Gotshal & Manges LLP is serving as legal counsel; Houlihan Lokey Capital Inc. is serving as investment banker; and AlixPartners LLP is serving as financial advisor to Cano Health.

The Ad Hoc Lender Group is represented by Gibson, Dunn & Crutcher as legal counsel, Evercore as investment banker, and Berkeley Research Group as financial advisor.

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