CASE SUMMARY: Akumin Prepackaged Chapter 11 Would Slash $450M in Funded Debt, Hand Noteholder Stonepeak 100% of Reorganized Equity, With Stonepeak Providing $130M New-Money Infusion

 

Representatives
Role	Name	Firm	Location
Debtors' Co-Counsel	Eric Lopez Schnabel Rachel P. Stoian Michael Galen	Dorsey & Whitney	New York
Debtors' Co-Counsel	Victoria N. Argeroplos Matthew D. Cavenaugh Jennifer F. Wertz J. Machir Stull Beau Butler	Jackson Walker	Houston
Debtors' Canadian Counsel	Dee Rajpal	Stikeman Elliott	Toronto
Debtors' Financial Advisor and CRO	Ronald J. (Jim) Bienias	AlixPartners	Chicago
Debtors' Investment Banker	Thaddeus Davis	Leerink Partners	New York
Counsel to the Ad Hoc Noteholder Group	Michael S. Stamer Jason Rubin	Akin Gump Strauss Hauer & Feld	New York
Counsel to UMB Bank NA as Prepetition 2025 Notes Agent	Ray Haniff	UMB Bank NA Corporate Trust	New York
Counsel to PNC Bank as Prepetition RCF Agent	Thad Wilson Britney Baker	King & Spalding	Atlanta
Counsel to Stonepeak Magnet Holdings LP as DIP Lender	Anthony Grossi Jason Hufendick	Sidley Austin	New York
U.S. Trustee	Casey Roy Andrew Jimenez	Office of the U.S. Trustee	Houston
Debtors’ Claims Agent	Kate Mailloux	Epiq	New York

Scheduling Motion

The debtors propose the following confirmation-related dates and deadlines:
 

• Nov. 15: Plan supplement filing deadline;
   
• Nov. 15 at 6 p.m. ET: Plan voting deadline;
   
• Nov. 22 at 6 p.m. ET: Plan objection deadline; and
   
• Nov. 29 at 2 p.m. ET: Combined DS approval and plan confirmation hearing.

Plan / Disclosure Statement

The plan’s classes, along with their impairment status and voting rights, are shown in the chart below:
 
Treatment of Claims and Interests

The debtors’ plan sets forth the following classification of and proposed distributions to holders of allowed claims and interests:
 

• Class 1 - Other secured claims: Each holder would receive, at the option of the applicable debtor, (i) payment in full in cash, (ii) the collateral securing its other secured claim, (iii) reinstatement or (iv) such other treatment rendering its other secured claim unimpaired in accordance with section 1124 of the Bankruptcy Code.
  • Claim mount: TBD
  • Recovery: 100%

• Class 2 - Other priority claims: Each holder would receive payment in full in cash.
  • Claim mount: TBD
  • Recovery: 100%

• Class 3 - Prepetition RCF claims: In the event of a reorganization transaction, holders would receive pro rata share of the new RCF exit facility. In the event of a sale transaction, holders would receive payment in full in cash.
  • Claim amount: “N/A (provided that the Prepetition RCF Claims are paid in full pursuant to the Interim DIP Order in accordance with the Restructuring Support Agreement and Prepackaged Plan)”
  • Recovery: 100%

• Class 4 - Prepetition 2025 note claims: In the event of a reorganization transaction, holders would receive their pro rata share of: (x) the new 2027 notes, “provided that, for the avoidance of doubt, any Allowed Prepetition 2025 Notes Claims arising on account of Selected Reverse Dutch Election Participating Notes shall not receive any portion of the New 2027 Notes that such Holder would have otherwise been entitled to receive on account of such Claims,” and (y) the opportunity to voluntarily participate in the reverse Dutch election opportunity by submitting a reverse Dutch election form prior to the deadline. In the event of a sale transaction, holders would receive payment in full in cash.
  • Claim amount: $475 million plus all interest, fees, redemption premiums, expenses, costs and other charges.
  • Recovery: 50% to 100%

• Class 5 - Prepetition 2028 notes claims: In the event of a reorganization transaction, holders would receive their pro rata share of: (x) the new 2028 notes, “provided that, for the avoidance of doubt, any Allowed Prepetition 2028 Notes Claims arising on account of Selected Reverse Dutch Election Participating Notes shall not receive any portion of the New 2028 Notes that such Holder would have otherwise been entitled to receive on account of such Claims,” and (y) the opportunity to voluntarily participate in the reverse Dutch election opportunity by submitting a reverse Dutch election form prior to the deadline. In the event of a sale transaction, holders would receive payment in full in cash.
  • Claim amount: $375 million plus all interest, fees, redemption premiums, expenses, costs and other charges.
  • Recovery: 50% to 100%

• Class 6 - Series A note claims (Stonepeak notes): In the event of a reorganization transaction, Stonepeak (as the 100% holder of Series A note claims) would receive 100% of the new common stock of the reorganized parent, subject to dilution (i) in accordance with the new corporate governance documents and (ii) for any new common stock issued to DIP lenders. In the event of a sale transaction, Stonepeak would receive payment in full in cash on account of its Series A note claims.
  • Claim amount: $469.3 million plus all interest, fees, costs and other charges.
  • Recovery: 0% to 100%

• Class 7 - General unsecured claims: Paid in the ordinary course “as if the Chapter 11 Cases had never been commenced.”
  • Claim amount: “TBD” but $93.6 million per the debtors’ liquidation analysis
  • Recovery: 100%

• Class 8 - Intercompany claims: At the option of the applicable debtor (with the consent of Stonepeak and in consultation with the required consenting noteholders to the extent the holders of the new notes may reasonably be affected), each holder would either be (i) reinstated, (ii) canceled, released, extinguished and of no further force or effect or (iii) “otherwise addressed at the option of each applicable Debtor such that holders of Intercompany Claims will not receive any distribution” on account of such claims.
  • Claim amount: NA
  • Recovery: NA

• Class 9 - Existing common stock interests: In the event the reorganization transaction is consummated, each holder would receive its pro rata share of $25 million in cash to be contributed by Stonepeak plus its pro rata share of an undisclosed number of contingent value rights, or CVRs, to the extent holders comply with the CVR distribution conditions. If the sale transaction is consummated, each holder would receive its pro rata share of any proceeds available after all claims and obligations of the debtors’ estates have been satisfied, or otherwise reserved for, in full in cash.

• Class 10 - Other equity interests: Each holder would not receive any distribution on account of such interests, which would be canceled, released and extinguished as of the effective date. For the avoidance of doubt, Stonepeak would not receive any recovery on account of the prepetition consenting investor warrants, which would be canceled, released and extinguished as of the effective date.

• Class 11 - Intercompany interests: At the option of the applicable debtor (with the consent of Stonepeak and in consultation with the required consenting noteholders to the extent the holders of the new notes may reasonably be impacted), each holder would either be (i) reinstated, (ii) canceled, released, extinguished and of no further force or effect or (iii) “otherwise addressed at the option of each applicable Debtor such that holders of Intercompany Interests will not receive any distribution” on account of such interests.

Milestones

The milestones contemplated under the RSA are as follows:
 

• Oct. 23 (one day after the petition date): Deadline for debtors to file the prepackaged plan, disclosure statement, solicitation procedures motion, DIP motion and bid procedures motion;
   
• Oct. 24 (two business days after the petition date): Entry of interim DIP order and order approving the solicitation procedures motion;
   
• Nov. 5 (14 calendar days after the petition date): Entry of bid procedures order;
   
• Nov. 12 (21 calendar days after the petition date): Commencement of the reverse Dutch election opportunity;
   
• Dec. 6 (45 calendar days after the petition date): Entry of the final DIP order and plan confirmation order; and
   
• Dec. 21 (60 calendar days after the petition date): Occurrence of plan effective date, provided that the outside date would be automatically extended by up to an additional 60 days if regulatory approvals necessary to consummate the plan have not yet been obtained by the debtors solely to the extent that all other conditions to the effective date have been satisfied or waived and further provided that the outside date may be extended by agreement of Stonepeak, the required consenting noteholders and the required threshold RCF lenders if such regulatory approvals are not obtained during the initial extension period.

Other Plan Provisions

The plan provides for releases of each debtor; each reorganized debtor or post-effective date debtor, as applicable; each consenting nondebtor hospital partner entity; each consenting physician-owned entity; the prepetition debt facility agents; Stonepeak as the consenting investor; each consenting stakeholder; the DIP lender and agent; all holders of claims and interests that vote to accept the plan; all holders of claims or interests that are deemed to accept the plan who do not affirmatively opt out of the releases; all holders of claims or interests that abstain from voting on the plan and who do not affirmatively opt out of the releases; all holders of claims or interests that vote to reject the plan or are deemed to reject and who do not affirmatively opt out of the releases; and each of their affiliates and related parties.

The plan also provides for exculpation of the debtors, any statutory committees appointed in the chapter 11 cases and their respective members.

According to the plan, a plan supplement that the debtors intend to file prior to the confirmation hearing would identify the officers and directors of the new board for the reorganized parent (in the event of a reorganization transaction) or the post-effective date plan administrator (in the event of a sale transaction).

Valuation Analysis

The debtors explain that they “do not want to prejudice the competitive sale process” in connection with their continued marketing efforts, and as a result, the DS does not include a valuation analysis. The DS notes, however, that the debtors intend to file the valuation analysis no later than the date that the plan supplement is filed.

Financial Projections

The DS includes the following financial projections based on Akumin’s long-term forecast developed in 2023:
     
Liquidation Analysis

The DS provides the following liquidation analysis, which states that the claim amounts are estimates as of approximately Sunday, Oct. 22, and are subject to change:
 
DIP Financing / Cash Collateral Motion

Stonepeak Magnet Holdings LP, as plan sponsor, would provide a new-money junior secured DIP credit facility in the aggregate amount of up to $75 million, with the full amount available upon entry of the interim DIP order. The DIP financing is tied to Stonepeak’s commitment to provide $130 million in new money upon the debtors’ emergence, insofar as the new investment would be reduced on a dollar-for-dollar basis by the DIP.

The DIP financing bears interest at 8% per annum paid in kind and matures 60 days after the petition date, subject to a 60-day extension if regulatory approvals necessary to consummate the plan have not yet been obtained, or other customary termination events occur.

DIP proceeds would be used to ensure that the debtors have sufficient liquidity to operate their businesses, administer their estates in the ordinary course during the chapter 11 cases and effectuate the RSA. The DIP facility would also be used, in part, to repay within seven days after entry of the interim DIP order the $55 million outstanding under the prepetition RCF in full, as set forth in the RSA. On the effective date, the DIP obligations would convert to equity.

To secure the DIP financing, the debtors propose to grant first-priority liens on substantially all of the debtors’ assets that are not subject to a lien, including previously unencumbered property, as well as a junior perfected lien on all of the debtors’ assets that are subject to a valid lien as of the petition date. The liens would be subject to the carve-out and junior and subordinate to the liens securing the prepetition secured obligations and the adequate protection liens. The DIP collateral also includes proceeds of the DIP collateral and would include liens on avoidance action proceeds upon entry of a final DIP order.

The DIP obligations would also be entitled to superpriority administrative expense status. The DIP superpriority claims may be repaid from any cash of the debtors, including cash collateral and avoidance action proceeds (upon entry of a final order).

The DIP financing does not include any fees, and proposes to pay all reasonable and documented professional fees of the DIP lender.

In support of the proposed DIP financing, the debtors filed the declaration of Ronald Bienias of AlixPartners, the debtors’ financial advisor. Bienias states that $75 million of DIP financing and access to cash collateral would be the minimum required to meet the debtors’ obligations under the RSA, finance their operations and maintain positive liquidity throughout the chapter 11 cases.

The debtors also filed the declaration of Thad Davis of Leerink, the debtors’ investment banker, who asserts that the DIP facility is fair, reasonable, in the best interest of the debtors’ estates, and reflects the “best available terms in the market.” Davis adds that “the Debtors have the ability to continue a marketing process to obtain better financing following the Petition Date if any such financing materializes on terms that are no worse than those of the DIP Facility.”

The company proposes the following adequate protection to its prepetition lenders: replacement liens liens; allowed superpriority claims; reasonable fees, costs and expenses of the professionals of the ad hoc group and the consenting RCF lenders; cash payments to the prepetition 2025 noteholders, prepetition 2028 noteholders and the prepetition RCF lenders equal to interest at the nondefault rate as and when due under the respective debt documents; and financial reporting.

In addition, the debtors propose a waiver of the estates’ right to seek to surcharge its collateral pursuant to Bankruptcy Code section 506(c), except to the extent of the carve-out, and the “equities of the case” exception under section 552(b) subject to the entry of a final order.

The post-termination carve-out for professional fees is $500,000.

The proposed budget for the use of the DIP facility is HERE.

The DIP financing is subject to the RSA milestones.

The lien challenge deadline for any official committee appointed is the earlier of 60 days from the entry of the interim DIP order or the date upon which the confirmation order is entered, provided that if the confirmation order is not entered within 60 days from the petition date, the committee would have 60 days from formation. The UCC lien investigation budget is $25,000.

Bid Procedures Motion

As previously noted, the debtors’ plan permits a pivot to a potential sale transaction and allows the debtors to run a sale process concurrently with their prepackaged reorganization process. This way, the debtors would be able to “determine through a market check if a higher and better actionable transaction exists as an alternative to the Reorganization Transaction,” explains the bid procedures motion. The motion seeks approval of proposed bid procedures for the sale of Akumin’s assets.

The motion recounts that Leerink, the debtors’ investment banker, began the prepetition sale process on July 18 by reaching out to a targeted list of potential transaction partners or buyers to explore the possibility of an alternative transaction to Stonepeak’s proposal. Leerink engaged with approximately 11 potential purchasers in July and August, and at such time, Leerink and the debtors’ special committee determined to exclude a small subset of potential partners or buyers “that constitute direct competitors of the Debtors to protect the Debtors’ trade secrets and competitive position in the marketplace.”

Four potential purchasers executed nondisclosure agreements and were granted access to a data room, but the initial marketing process did not result in any proposals or offers to engage in an alternative transaction for the debtors’ businesses or assets.

Beginning on Oct. 2, Leerink reinitiated the sale process and reached out to 22 parties, including the parties previously contacted, the competitors previously excluded during the initial process and a targeted group of private equity firms. As of Oct. 17, six parties have executed NDAs and were granted access to a data room.

The debtors propose the following sale-related dates and deadlines:
 

• Oct. 23 at 3:30 p.m. ET: Bid procedures hearing;
   
• Nov. 10 at 6 p.m. ET: Bid deadline;
   
• Nov. 13: Auction (if required);
   
• Nov. 14: Deadline to file notice of winning bid (if applicable);
   
• Nov. 22 at 6 p.m. ET: Deadline for sale objections;
   
• Nov. 27 at 6 p.m. ET: Deadline to file reply to sale objections; and
   
• Nov. 29 (subject to court availability): Confirmation and sale hearing.

Pursuant to the proposed bid procedures, each bid must provide cash consideration sufficient to (i) provide the holders of all existing common stock value in an aggregate amount greater than $25 million plus the value of the CVRs and (ii) fully satisfy (a) the DIP claims of the DIP lender, (b) the prepetition RCF claims of the prepetition RCF agent and lenders, (c) the prepetition 2025 notes claims, (d) the prepetition 2028 notes claims, (e) the prepetition Series A notes claims and (f) the allowed general unsecured claims, each in full and in cash “or such other treatment as may be agreed to by such creditors.”

The bid procedures also include a 10% good-faith deposit requirement for bidders and permit credit bids of all or a portion of the face value of a secured party’s secured claims against the debtors. Each of the prepetition secured lenders and DIP lenders would be deemed to be a qualified bidder and may submit a credit bid of all or any portion of their respective secured claims, including any DIP financing claims, pursuant to the bid procedures.

The motion explains that if the debtors obtain a winning bid (in their business judgment and in consultation with their advisors and the consultation parties and subject to the reasonable consent of the DIP lender and the required consenting noteholders), the debtors would seek to confirm the provisions of the plan effectuating the sale transaction.

In support of the bid procedures motion, the debtors filed the declaration of Leerink’s Robert Jackey, who says he does not believe a longer sale process would result in additional parties participating in the sale process or a higher value or return to the debtors.

Separately, the debtors filed a motion to reject 10 “burdensome” leases. Rejecting the leases would save the debtors’ estates approximately $3.16 million before factoring in operating expenses, says the motion.

Other Motions

The debtors also filed various standard first day motions, including the following:
 

• Motion for joint administration
  • The cases will be jointly administered under case No. 23-90827.
• Motion to establish trading procedures
  • The company seeks to establish trading procedures for its common stock, to be able to object to and prevent transfers if necessary to preserve net operating losses. The debtors estimate that as of Dec. 31, 2022, they had about $911 million in federal and state NOLs and significant asset basis, together with certain other tax attributes.
• Motion to pay employee wages and benefits
  • The company seeks to pay wages and benefits totaling approximately $13.7 million as of the petition date.
• Motion to use cash management system
  • The company has bank accounts with JPMorgan Chase, PNC Bank, Bank of America, Bank United, Royal Bank of Canada, Northern Trust Bank, Regions Bank, Seacoast, SouthState Bank, Southwest National Bank, Truist Bank, Wells Fargo and ICBC.
• Motion to maintain insurance programs
• Motion to pay taxes and fees
  • The company seeks to pay $4 million of taxes and fees accrued and unpaid as of the petition date.
• Motion to provide utilities with adequate assurance
• Application to appoint Epiq as claims agent