On the 363 Auction Block: Nuvectra Corporation

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Nuvectra Corporation has filed for chapter 11 protection in the Bankruptcy Court for the Eastern District of Texas with the hope of selling substantially all of its assets.

Nuvectra is a Plano, Texas-based neurostimulation medical device company whose core product is Algovita, a spinal cord stimulation system used to treat certain forms of chronic pain. Product performance issues, competitive pressures, and a general slowdown in the spinal cord stimulation market lead to declining sales, erosion in confidence among physicians, loss of sales personnel, and ultimately, the suspension of product sales of Algovita. According to a press release, the company says it is committed to supporting existing patients using Algovita, but it is suspending support of future implants “until the Company’s path forward is determined.”

Piper Jaffray began a marketing process in August, contacting 50 potential parties with respect to a sale or merger of the company as a whole, or Algovita or Virtis (its neurostimulation technology platform currently in an FDA approval process), on a standalone basis. Nuvectra has indicated it plans to conduct a post-petition marketing and 363 sales process over the next several weeks. Nuvectra has not yet filed a motion to approve sales procedures or set bidding deadlines.

Neuvetra’s SEC filings are available for download, and information about is bankruptcy filing is available free of charge on KCC’s website.

Mette Kurth

On the Auction Block: True Health Group

THG Holdings, better known as True Health Group and True Health Diagnostics, a Texas-based laboratory management and diagnostics services provider for the healthcare industry, has filed for bankruptcy protection in Delaware.

Concerns, Investigations & a Liquidity Crisis

The filing follows a severe liquidity crisis triggered when the Centers for Medicare and Medicaid Services instituted a 100% hold on all Medicare payments. The suspensions came amid concerns raised by CMS and multiple investigations by the U.S. Department of Justice.  True Health says that this is all old news.

Between June 23, 2017 and the end of May 2019, the Debtors took substantial steps to address the claims asserted and the concerns raised by CMS and the United States Department of Justice. . . . . [They] negotiated a comprehensive settlement with DOJ, including a new corporate integrity agreement [that] was on the verge of being consummated when CMS and DOJ advised the Debtors of a second investigation and CMS imposed a second 100 percent hold on all Medicare payments to THD. The Debtors believe that this most recent suspension is based on the very same conduct that [was addressed in the settlement and corporate integrity agreement].

–Clifford A. Zucker, Chief Restructuring Officer

A Naked Bankruptcy Auction

In the aftermath of the suspension, True Health has engaged SSG Advisors to run a “naked” bankruptcy auction process with no buyer in hand and a proposed sale closing by the end of September. If you are interested in making an offer, that means that “stalking horse” protections (e.g., breakup fees and expense reimbursements) are still up for grabs. The proposed bid deadline is September 13th.

True Health’s Operations

Founded in 2014, True Health is one of the largest independent providers of lab management and diagnostic services in the US.  The company operates full-service clinical laboratories offering, among others, comprehensive testing for biomarkers that can indicate risk for cardiovascular disease, diabetes, autoimmune disorders, cancer and other diseases. In total, True Health offers more than 400 tests and has handled more than 1.5 million patient samples.

Currently, True Health runs about 1,370 samples per day through two facilities – a 109,000 square foot facility in Richmond, Va., and a 7,000 square foot facility in Frisco, Texas. The company serves 1,250 physician offices spanning 46 states and Washington, D.C. It claims its advanced testing provides a “far broader and deeper picture of patient health than traditional testing.” True Health also offers an online patient portal that provides interactive reports, live coaching help, patient engagement videos and lifestyle tracking tools.

Long-Term & Trade Debt

True Health entered bankruptcy with over $174 million of debt obligations, including long-term debt of $150 million and $14 million in trade debt.

Mette K.

Papa Gino’s & D’Angelo Enter Bankruptcy

PGHC Holdings, operator of New England-based Papa Gino’s and D’Angelo, filed for chapter 11 protection on Monday.  Not surprisingly, the case is pending in Delaware.

Reasons for the Bankruptcy? Same Old/Same Old

Also not surprising, the bankruptcy follows performance struggles faced by both Papa Gino’s and D’Angelo as a result of:

  • Evolving consumer dining preferences;
  • Increased labor costs; and
  • Increasing competition among national chains.

Remember Real Mex, for example? Or Bertucci’s? Restaurant growth is continuing to slim down, folks….

In addition to operational factors, Papa Gino’s and D’Angelo have a substantial debt load that they have been unable to service. This includes: $18.5 million in first-lien, secured debt; $34.2 million in second-lien, secured debt; $39.9 million in unsecured mezzanine debt; and $9 million in unsecured trade debt, lease obligations and repair obligations. And Pappa Ginos and D’Angelo are in default under both the first and second lien agreements while the 16% senior subordinated notes matured last June. Ouch.

What Happens to Papa Gino’s and D’Angelo’s Next?

Although Papa Gino’s may be a “New England original,” its bankruptcy plans are not.

The company intends to close roughly 92 locations (47 Papa Gino’s / 45 D’Angelo). In addition, they have secured a $13.8 million in post-petition financing from an existing, secured lender to keep the company afloat. And a credit bid by the lender’s designee, a Wynnchurch Capital portfolio company, serves as the “stalking horse,” opening offer to purchase both the Papa Gino’s and D’Angelo restaurants. The stalking horse credit bid is $20 million plus assumption of certain liabilities.  Ultimately, a bankruptcy auction will determine the highest and best bidder.

The sale timeline is:

  • Bid procedures shall be established by December 17, 2018;
  • The auction is to be held by January 28, 2019;
  • A hearing on the sale shall be held and sale order entered by January 31, 2019; and
  • The sale closing shall take place by January 31, 2019.

Papa Gino's

Papa Gino’s and D’Angelo have issued a press release. The proposed sale transaction, they say, will significantly strengthen their financial resources. This will allow the restaurants to remodel and modernize across MassachusettsNew HampshireRhode Island, and Connecticut. They also plan to open additional restaurants throughout New England.

Hungry? Look forward to enhanced on-line ordering capability as well.

Mette K.

Dixie Electric Seeks Bankruptcy Protection

Dixie Electric, LLC, d/b/a Expanse Energy Solutions, filed for chapter 11 protection in Delaware on Friday along with various affiliates. Dixie is a Houston-based, privately held electrical infrastructure materials and services provider in the energy and oil industry. Dixie filed with a restructuring support agreement in hand. And the company is on a fast-track to implement a pure balance sheet restructuring. Under the agreement, lenders will exchange $300 million in funded debt for equity in the company. Prepetition secured lenders have also agreed to provide $17.5 million in debtor-in-possession financing and $30 million in exit financing to the company. General unsecured claims are unimpaired and slated to be paid in full.

Dixie blames its bankruptcy filing on decreased drilling and well completion activity. A recent slump in oil and gas prices triggered this drop in business. And tightness in the skilled labor market and unprofitable lump-sum contracts exacerbated the company’s problems. As a result, Dixie’s adjusted EBITDA plummeted from a peak of over $71 million in 2014 to negative $6.5 million in 2017. The company’s credit ratings have also deteriorated as losses mounted.

Dixie’s “first day” motions have been approved by the bankruptcy court. The hearing on its combined plan and disclosure statement is scheduled for December 13, 2018 in Delaware. Additional information about the case is available here.

Mette K.

Ever Wish You Could Re-Live Your College Years? Here’s an Opportunity for a Great Cause!

Hello Linked In!

My son, Justin, along with most of his brothers, is participating in a charity event called St. Baldrics. (Yes, that’s right… in a surprise development, my wonky son has stopped studying long enough to join a frat! Now, it is a frat full of young RPI engineering students. So let’s not get carried away. But it is a frat. Hijinks and shenanigans are involved.)

I digress, though. The young men are fundraising to help promote research into childhood cancer. At the conclusion, they will then shave their heads to raise awareness.

Being a supportive mother, I have made my donation ($250) on the condition that my very camera-shy freshman provide before and after photos.

Now Justin has asked if I can also spread the word to all of you. And if I do that, it seems only fair that you should be able to join in the fun as well. So…. If my Linked In/Facebook community, collectively, matches my donation, I will post those before and after photos for everyone to share at the conclusion of the fundraiser. I mean, this is clearly the only possible response; right? (Diabolical laughter! My children will need so much therapy….)

As an added bonus, if you all double my donation, I will also share with you the very special cheer of the RPI Engineers football team. For perspective, I first bring you this video clip from my alma mater… the Trinity University Miracle Lateral Play.  Suffice it to say, nobody in my family will ever be playing football for USC. Or UCLA.

Seriously, please help Justin with this great cause!  You can donate here.

Mette K. (Proud Mother)