Register, or Login to view the article
December 16, 2020 – MTPC, LLC and two affiliated Debtors (“collectively, the “Debtors”FN) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Middle District of Tennessee, lead case number 20-05438. The Debtors, the operator of three full-service proton therapy and cancer-treatment centers, are represented by David E Lemke of Waller Lansden Dortch & Davis LLP. Further board-authorized engagements include (i) Foley & Lardner LLP as general bankruptcy counsel, (ii) Trinity River Advisors as restucturing advisors (and to furnish a Chief Restucturing Officer) and (iii) Stretto as claims agent.
The Debtors’ lead petition notes between 100 and 200 creditors; estimated assets between $50.0mn and $100.0mn; and estimated liabilities between $100.0mn and $500.0mn. Documents filed with the Court list the lead Debtor's three largest unsecured creditors as (i) Raysearch Americas Inc. ($250k trade claim), (ii) Gray Television – WVLT/EVLT ($77k trade claim) and (iii) Boston Scientific Corporation ($41k trade claim).
On a consolidated basis, the three Debtors, each of which operate substantially independently and which have separate financing arrangements, have the following assets and liabilities (unaudited and as of August 31, 2020)
- MTPC: assets of $105.6mn and liabilities of $131.2mn
- PCPTK: assets of $93.4mn and liabilities of $130.2mn
- PCPT Hamlin: assets of $139.2mn and liabilities of $138.5mn
FNThe three Debtors, each of which operates a separate treatment center, are:
- MTPC, LLC d/b/a Provision CARES Proton Therapy Center Nashville, (“MTPC”);
- The Proton Therapy Center, LLC d/b/a Provision CARES Proton Therapy Center Knoxville, (“PCPTK”); and
- PCPT Hamlin, LLC d/b/a Provision CARES Proton Therapy Center Orlando, a limited liability company organized under the laws of Florida (“PCPT Hamlin”)
Goals of the Chapter 11 Filings
The Andrews Declaration (defined below) provides: "The Debtors have commenced these Chapter 11 Cases to implement a comprehensive financial restructuring with three (3) core objectives: (a) deleveraging the Debtors’ balance sheets; (b) ensuring that the Debtors can continue to provide leading cancer and healthcare solutions to their patients; and (c) engaging with their creditors to maximize value for all stakeholders."
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Andrews Declaration”), Mark Andrews, the Debtors’ Chief Restructuring Officer, detailed the events leading to the Debtors’ Chapter 11 filings. The Andrews Declaration details Debtors hit by liquidity concerns from the outset, with the pace of development of their three centers and their ability to roll-out of revenue generating services always a step behind their debt servicing obligations.
Once online (only two of the three facilities, one operated by each of the three Debtors, are completed), the Debtors suffered from lower than expected Medicare reimbursement rates and occupancy rates; with declining revenues further exacerbated by COVID-19 (which served to scare off prospective clients) and a cyberattack. The tightening liquidity noose of course an unvirtuous cycle leaving the Debtors with damaged vendors relationships; unpaid bondholders and senior lenders; and without the funds necessary to get their third facility (the Orlando-based PCPT Hamlin) operational.
The Andrews Declaration provides: “PCPTK was the first proton therapy cancer treatment center in Tennessee, second in the Southeast, and 13th in the nation. Building on the success of the PCPTK, MTPC established a proton therapy cancer treatment center in Nashville in 2018. PCPT Hamlin has been constructing a proton therapy center in the Hamlin community, just outside of Orlando, Florida, since December, 2018.
Due to financial difficulties, PCPT Hamlin has been unable to secure the majority of the equipment necessary to complete its proton therapy center. It is uncertain when the Hamlin proton therapy center will be operational.
From the beginning, the Debtors experienced difficulties in meeting their obligations.
As of the Petition Date, there was approximately $108.8 million in principal amount outstanding on the Series 2014 Knoxville Bonds. As of the Petition Date, there was approximately $113.7 million in principal amount outstanding on the Secured Series 2017 Nashville Bonds; approximately $5.0 million in principal amount outstanding on the Subordinate Series 2017 Nashville Bonds; and approximately $5.0 million in principal amount outstanding on the Unsecured Series 2017 Nashville Bonds.
As of the Petition Date, there was approximately $135.5 million in principal amount outstanding on the Series 2018 Orlando Bonds, spilt between Senior Secured Notes of $125.5 million and Subordinated Notes of $10.0 million.
Due to lower than projected [Medicare] reimbursement rates and patient volume, PCPTK and MTPC have not been able to service the bond debt and have also been essentially relying on a subsidy of credit terms from the Service Providers. As a result, the Service Providers built up a receivable of $10.4 million from PCPTK and MTPC. That caused the Service Providers to have difficulty paying their own vendors, including their primary lender, ServisFirst Bank. While the Centers were stretched, they kept paying the bondholders current until November 2019. Shortly thereafter matters worsened. COVID made patients reluctant to seek diagnosis or treatments. At PCPTK, the patient count went down from a daily total of 66 to 47, and PCPTK’s earnings dropped from $2,045,751 to $1,486,416 on a monthly basis. At MTPC, the patient count went down from a daily total of 43 to 24, and MTPC’s earnings dropped from $1,598,549 to $895,771 on a monthly basis.
Adding to these difficulties, the Centers were hit with a cyberattack in late October 2020, crippling their essential computer systems and financial-reporting capabilities. That attack rendered some data temporarily inaccessible, amplifying an already tight cash situation.
PCPT Hamlin has suffered, too. It was under construction during this period, and its progress payments fell short of what was required to complete the entire equipment list. While the building is substantially complete and has a certificate of occupancy, the equipment installation and fabrication is not yet complete.”
About the Debtors
According to the Andrews Declaration: "The Debtors are non-profit companies, two are operating individually as full-service proton therapy and cancer-treatment centers, and one is being developed as the same. As non-profit companies, the Debtors are devoted to the health and well-being of their regional communities by providing exceptional care to their patients. The Debtors have provided, collectively, more than 100,000 treatments since they opened their doors.
Each Debtor is a limited liability company. Two operate full-service proton therapy and cancer-treatment centers, and one is developing a full-service proton-therapy and cancer-treatment center. MTPC operates the facility in Nashville, Tennessee. PCPTK operates the facility in Knoxville, Tennessee, and PCPT Hamlin is developing the facility in Winter Park (Hamlin), Florida. The Debtors operate vertically-integrated companies in cancer care with connections between the cancer-care provider, systems and technology, operator, and developer (noting that the facility operated by PCPTK utilizes a treatment system from a third party, IBA).
PCPTK was the first proton therapy cancer treatment center in Tennessee, second in the Southeast, and 13th in the nation. Building on the success of the PCPTK, MTPC established a proton therapy cancer treatment center in Nashville in 2018. PCPT Hamlin has been constructing a proton therapy center in the Hamlin community, just outside of Orlando, Florida, since December, 2018."
As to what proton therapy actually is, the Declaration continues: "The Debtors employ a next-generation proton-therapy system using external beam radiotherapy along with innovative healthcare solutions focused on improving patient care and clinical outcomes for cancer patients. Conventional x-ray therapy deposits energy along the entire path of the beam when entering and exiting the tumor site, which damages healthy organs and tissues of a patient. The proton therapy provided by the Debtors is non-invasive treatment that precisely targets cancerous and non-cancerous tumors and reduces the risk of side effects to surrounding healthy tissue. 19.The Debtors use the most precise form of proton therapy, called “Pencil Beam Scanning,” which allows physicians to target the tumor area with the highest radiation dose by a proton beam only millimeters wide, thus controlling both the depth and the position of the beam, and planning the exact point at which the proton beam stops inside the body. This allows doctors to spare healthy organs and bodily tissue from unnecessary radiation exposure while treating tumors and diseased tissue. This approach has been shown to improve the quality of life for patients both during and after treatment and may lead to reduced patient side effects, fewer patient treatments, improved local cancer control, and improved quality of life for the patient, and shorter treatment times.
Corporate Structure Chart
Read more Bankruptcy News