UNITED STATES: Five years after KKR’s $10 billion leveraged purchase that took Envision Healthcare private, the doctor staffing company declared bankruptcy. Regulatory changes, the Covid-19 outbreak, and increasing labour expenses have hurt both companies operated by the Tennessee-based Envision. Industry watchdogs are focusing more attention on private equity’s involvement in US healthcare.
Companies have been forced to undergo restructuring due to money shortages and rising interest rates. Envision’s $3.5 billion equity investment is expected to be destroyed in the restructuring. Surprising billing, where insurance policies do not cover the price of a certain hospital, has caused patients to be surprised with exorbitant treatment bills. The No Surprises Act was enacted to prevent this.
Envision has been in conflict with UnitedHealthcare, charging that the insurer is evading its obligation to pay for patients’ expenses. In an arbitration case, the company won a $91 million award but could have avoided bankruptcy if UHC had paid in accordance with its expectations.
UHC has sued Envision for alleged overbilling, but it did not respond to a request for comment. The company stated to the Financial Times that it would continue to protect members and customers from bad actors.
Envision concluded a refinancing arrangement in August of last year to increase liquidity and buy back existing debt at a reduced price. The more profitable AmSurg assets were not available to the current company lenders.
Angelo Gordon, Centerbridge Partners, and Pimco contributed to the new AmSurg $1.1 billion senior loan. Envision raised money with a new loan, and the bankruptcy deal has won the backing of the majority of creditor parties. The company is to be reorganised into a distinct entity from AmSurg, reducing its combined debt to just $2 billion.
Pimco is leading a $300 million financing to buy the final fifth of Envision’s surgical facilities firm. Senior lenders such as Strategic Value Partners, Brigade Capital, Blackstone, and Eaton Vance will exchange their papers for shares of the reorganised Envision. Holders of the least senior loans and $1 billion in bonds will lose everything.
The business has joined a group of companies that have filed for bankruptcy this year, including Silicon Valley Bank Group, Bed Bath & Beyond, Avaya, Party City, and Diamond Sports. The case is expected to be resolved in three to four months.
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