With Gordian’s guidance, the Healthcare Technology & Services Company sold its technology business and restructured around Services, capitalized with $10 million of cash that should have otherwise paid down the lenders, providing significant liquidity.
Case Study
Undisclosed Healthcare Technology & Services Company
CLIENT: Undisclosed Healthcare Technology & Services Company
Business Profiles
Private Equity / Entrepreneur RepresentationsSituation
Following the loss of contracts representing a significant portion of the services-related business, the Company experienced consistent and continued deterioration in its liquidity position that placed it in violation of covenants with its secured lenders. A liquidity infusion by the sponsor followed, and the Company entered into a forbearance agreement with its lenders that effectively put the Company on an M&A path.
Around the time Gordian was hired, it became clear that the purchase prices for each of the businesses would be close to or barely above the amount of secured debt, and that the equity holders’ entire investment was at risk of being wiped out. Additionally, the buyer for the cash burning services business was at risk of walking away from the transaction, which eventually occurred. Gordian assisted the company in striking an agreement with its lenders whereby the equity holders would share in proceeds from the sale, entitling them to up to $15mm before the secured debt was paid in full. Gordian was able to leverage the lenders’ desire to exit their credit exposure with the threat of aborting the sale processes for a restructuring process.
Following the loss of the services business buyer, Gordian pivoted and helped the Company strike a deal with the lenders that combined a sale of the tech business with a restructuring of the services business. In return for a partial pay down, the lenders permitted the Company to (i) retain cash that was owed to them under the credit docs and (ii) receive sufficient covenant runway for the Company to achieve a turnaround.
Engagement
The Company is a private, sponsor-backed player in the Population Health Management industry that provides both software and services to hospital networks, insurance companies, and government payers, among others.
Outcome
The Company consummated a transaction whereby it sold the technology business and restructured around Services. The lenders effectively capitalized with $10 million of cash on the balance sheet that should have otherwise paid down the lenders, providing significant liquidity and covenant headroom to achieve a turnaround.