On February 19, 2020 (the “Petition Date“), Hygea Holdings Corp. (“Hygea”, or the “Company”) and thirty-two of its affiliates (collectively, the “Debtors”) each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.
The Debtors are represented by Cole Schotz P.C. The case has been assigned to the Honorable Karen B. Owens. A hearing on the Debtors’ first day motions was held on February 21, 2020. A meeting to form the unsecured creditor’s committee will be held on March 10, 2020.
Headquartered in Miami and founded in 2007, Hygea is a consolidated enterprise of several companies that focus on the delivery of primary-care-based health care to commercial, Medicare and Medicaid patients. The Debtors currently provide health-care-related services to approximately 190,000 patients in the southeast United States through two platforms: individual physician practices and physician group practices with a primary-care-physician focus, and management services organizations (“MSO”s). The physician practices consist of approximately seventeen active brick-and-mortar locations throughout South and Central Florida and Georgia, which focus on family medicine, internal medicine, clinical cardiology and other concentrated disciplines. The MSOs are entities which, under contract, arrange for medical and medically related services to patients on behalf of a health plan.
The Debtors state that their financial situation has been deteriorating for a variety of reasons. In recent years, they pursued an aggressive growth strategy, in some cases purchasing certain physician practices with minimal net profit, and the operating losses of those practices, along with the associated acquisition costs, have caused a substantial drain on the Debtors’ liquidity. The Debtors’ failed acquisition of certain MSOs for which they were unable to maintain the investment required has similarly contributed to liquidity constraints. In addition, the Debtors’ historical financial reporting was inadequate, causing deficiencies in their financial forecasting as well as cash management, causing them to overspend in the face of an already unsustainable debt load. The Debtors have been unable to raise additional capital to fund these losses, in part due to pending litigation which the Debtors do not have the liquidity to defend or settle.
With the help of an investment banking firm, the Debtors attempted to evaluate strategic alternatives and the sale and/or refinancing of the Company but were unable to move forward with a transaction. On or about October 31, 2019, the Debtors and Bridging Income Fund LP (formerly known as Sprott Bridging Income Fund LP) (the “Lender”) and Bridging Finance Inc. (the “Administrative Agent” and, together with the Lender, “Bridging”) entered into a forbearance agreement in which Bridging agreed to provide in excess of $6 million of emergency funding to the Debtors, enabling them to satisfy critical expenses. As of Feb 7, 2020, the Debtors and Bridging engaged in negotiations that led to a restructuring support agreement, pursuant to which the Debtors agreed to commence these cases and pursue a restructuring through a chapter 11 plan. Bridging has agreed to provide the Debtors with debtor-in-possession financing to support the administrative and operational expenses of the cases, which the Debtors believe will provide a clear path to the emergence and will allow them to succeed as restructured companies thereafter (See Keith Collins Affidavit in Support).
As of the Petition Date, the Debtors have assets of approximately $77.3 million and liabilities of approximately $212.2 million, consisting of approximately $76.3 million in current liabilities and approximately $135.9 million in long-term liabilities. These long-term liabilities relate to in excess of approximately $160 million Canadian (approximately $121 million U.S.) under credit agreements with Bridging. The Debtors have unsecured debt in the form of accounts payable and accrued and other liabilities. Among other things, the liabilities consist of contingent, unliquidated and disputed litigation claims in excess of $50 million and payroll tax liabilities in excess of $10 million.
DIP/Cash Collateral Motion
The Debtors request authority to enter into a post-petition financing arrangement, in an aggregate principal amount of $9,980,303, on terms set forth in an agreement between Bridging Finance Inc. and its affiliated lenders, authorizing the use of cash collateral.
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| Unspecified, but at least $212.2 million. | |
| Unspecified, but at least $60 million. | |
| FIRST DAY RELIEF FOR AUTHORIZATION TO PAY AND PAYMENTS | |
| Interim Relief $16,407 (average monthly payment), as it comes due for premiums. | Final Relief An aggregate amount not to exceed $165,000. |
| Interim Relief An aggregate amount not to exceed $30,000. | Final Relief An aggregate amount not to exceed $30,000. |
| Employees: 157: 139 full-time/18 part-time | |
| Interim Relief Authorization to pay prepetition employee obligations as they come due, in an aggregate amount not to exceed $897,246. Authorization to reimburse employees for expenses in an aggregate amount not to exceed $15,275. Authorization to pay all employee withholdings as they come due. No payment shall exceed the statutory cap of $13,650. | Final Relief Unspecified. Authorization to pay related obligations as they come due.
No payment shall exceed the statutory cap of $13,650. |