The Brentwood, Tennessee–based hospital operator announced that it had entered into an RSA on a "pre-packaged plan" to reduce its debt by about $500 million.
Quorum Health Corp. announced Tuesday that the company filed for Chapter 11 bankruptcy.
In a filing with the Securities and Exchange Commission (SEC), the Brentwood, Tennessee–based hospital operator announced that it had entered into a restructuring support agreement (RSA) on a "pre-packaged plan" to reduce its debt by about $500 million.
Despite the bankruptcy filing, Quorum said its hospitals will remain open along with its subsidiary Quorum Health Resources. Additionally, employees will be paid full wages and benefits while supply vendors are also paid for goods and services.
Last week, Quorum delayed the filing of its Form 10-K with the SEC, stating that ongoing discussions with its debt holders had "diverted significant management time and internal resources" away from reviewing and completing financial forms.
Robert Fish, CEO of Quorum, said in a statement that filing for bankruptcy will allow the business to restructure its operations and "enable our community hospitals to continue the important work they are doing in addressing the COVID-19 crisis."
"Quorum Health has been transparent about the need to restructure our debt over the past year," Fish said. "We believe the RSA will significantly reduce our debt and annual interest expense and better position our company, our affiliated hospitals, and our hospital management and consulting company, for future growth. The RSA will also build on the significant progress we have made to strengthen our operations. We are grateful for the support of our financial stakeholders, which we believe represents a statement of confidence in our business and enables us to move through this process on an expedited basis."
The bankruptcy filing is the culmination of months-long discussions with Quorum debt holders, including KKR & Co., a New York-based private equity firm.
In December, KKR presented Quorum with a non-binding proposal letter that related to a "potential recapitalization transaction," including the "buy-out of the public shares held by minority holders at a price of $1.00 per share."
In its Q3 2019 earnings report, the company's most recent financials, Quorum posted a net loss of nearly $76 million and saw net revenues decline by $41 million.
Quorum's cash flow from operating activities also fell during the quarter, sliding by $3 million.
At the end of Q3, the company reported $1.2 billion in long-term debt.
Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.