Receiver & Bankruptcy Monitor of 5 Urgent Care Clinics
Interim Management, Sellside M&A, Cash Flow Management
The Bottom Line:
As receiver of 5 insolvent urgent care clinics located in Southern California, Stapleton Group quickly determined the clinics’ bank was at risk of repayment due to poor cash flow and a pending $2 million wage-and-hour class action lawsuit. Stapleton managed the clinics while successfully negotiating a going-concern sale of 3 clinics to their hospital-landlord.
- Unexpectedly, the clinics’ owner filed for bankruptcy 30 minutes before the hearing to approve the sale.
- Stapleton was appointed monitor by the bankruptcy court, and continued to pursue an exit strategy for the bank.
- After 15 months and $1.0 million in fees, the bankruptcy judge granted relief from stay and proposed the original deal Stapleton had negotiated – the going-concern sale of 3 of the clinics to their hospital-landlord.
The Business Issue:
The operator of 5 urgent care clinics had defaulted on two bank loans, after failing to attract sufficient walk-in business, and was facing a pending $2 million judgment in a wage-and-hour class action lawsuit brought by former employees. The bank and its borrower had suffered through a lengthy dispute over resolving the defaults, and the bank was at risk of losing control of the business’s assets to the class action lawsuit’s judgment creditor.
Genesis of Stapleton’s Engagement:
One day before the hearing on the class action lawsuit, Stapleton was appointed receiver on behalf of the bank, providing the bank with total control over the clinics’ assets.
Obstacles and Stapleton’s Solutions:
- The hospital-landlord of 3 of the clinics had a lien on the clinics’ personal property, but had failed to perfect its interests, putting the bank in first position.
- Stapleton successfully negotiated the sale of the 3 clinics as going-concerns to the hospital for the appraised value of fixed assets plus taking over the leases.
- Stapleton assisted with the ownership transition.
- The company filed bankruptcy 30 minutes prior to the court hearing to approve the sale of 3 of the clinics to their hospital-landlord for the appraised value of fixed assets plus assumption of leases.
- Stapleton was approved as monitor by the bankruptcy court.
- As monitor, Stapleton provided essential independent reviews of debtor’s financial statements required by the bankruptcy court, keeping the bank and its counsel informed of the clinics’ actual performance.
- The bank was at risk of losing control of the business’s assets to a class action lawsuit’s judgment creditor.
- Once appointed as receiver, Stapleton protected the bank’s best interests by managing cash flow and overseeing business operations while negotiating a sale.
- Stapleton managed the class-action claimants’ expectations, as subordinate to the bank.
- Stapleton worked closely with the borrower’s CEO, managing:
- Financial Reporting
- Billing & Collections
- Staffing
- HIPAA Compliance
- Cash Flow
- Vendor relationships