New Chapter Bankruptcy Filing - SAS Healthcare Inc.

SAS Healthcare Inc. 

January 31, 2019

Dallas/Fort Worth-based mental health facilities operator filed for bankruptcy last week in the Northern District of Texas. The more we read about these healthcare bankruptcies, the less and less assured we feel about healthcare generally. Holy sh*t a lot of them have hair on them. 

Here, the debtors operate three mental health treatment facilities — in Arlington, Dallas, and Fort Worth. Therein, the debtors provided — and we mean, "provided" — in-patient and out-patient mental health care to children, adolescents and adults struggling with substance abuse and addiction, mental health disorders and behavioral and psychological disorders. Why the past tense? Because thanks to an investigation by the Tarrant County District Attorney and subsequent indictments, the debtors ceased operations in December 2018. 

The debtors —owned in in equal 1/3 parts by three individuals — has $8.26mm in secured debt (Ciera Bank), a $503k drawn secured revolving line of credit with Ciera Bank, a $4.3mm secured term loan with Southside Bank (exclusive of another $3mm in unpaid principal and interest), a $5.6mm construction loan with Southside Bank (exclusive of another $4.3mm in unpaid principal and accrued interest); a $850k secured loan with Southside, a $400k second lien secured bridge note with REP Perimeter Holdings LLC, and $1.325mm subordinated secured note from the owners. 

Back to those closures. The grand jury investigation led to a lot of negative publicity which, in turn, led to an abrupt end in patient referrals from the two largest referral sources. The end effect? Decimated revenue. The company secured its bridge loan and performed operational triage but the second indictment proved to be a death knell. Without ongoing operations and with all of that debt, the debtors had to file for chapter 11 to trigger the automatic stay and buy itself time to conduct a marketing and sale process to sell their assets to stalking horse purchaser and prepetition lender, REP Perimeter Holdings LLC. 

  • Jurisdiction: N.D. of Texas (Judge Mullin) 

  • Company Professionals:

    • Legal: Haynes and Boone LLP (Stephen Pezanosky, Jarom Yates, Matt Ferris)

    • Financial Advisor: Phoenix Management Services LLC (Brian Gleason)

    • Investment Banker: Raymond James & Associates Inc. (Michael Pokrassa)

    • Claims Agent: Omni Management Group (*click on company name above for free docket access)

  • Other Parties in Interest:

New Chapter 11 Bankruptcy - Vasari LLC (d/b/a Dairy Queen)

Vasari LLC

  • 10/30/17 Recap: Texas-based large franchise operator of Dairy Queen brand restaurants operating approximately 70 locations across Texas, Oklahoma and New Mexico filed for bankruptcy. Burdened under the weight of its debt, its lease obligations, and franchise fees, the company struggled to generate revenue to offset its obligations. Why? Well, somewhat surprisingly, the company doesn't immediately dive into the "restaurant excuse bin" (air-quotes) with hackneyed narratives like "bad weather," "experiential desires" and "millennials don't SNAP upside-down frozen treats." Rather, the company notes, "[t]he difficulties faced by the Debtor can largely be traded to the much publicized decline in oil prices. The decline in oil prices has severely impacted the job market for oil related jobs in regions of west Texas and east Oklahoma and has thus resulted in cross-industry declines in revenues in areas heavily dependent on oil related jobs." The company continues, "Since bouncing from a 12 year low, oil prices have begun to rebound; however, oil-related jobs have not. Without oil-related jobs, certain DQ locations will likely continue to underperform, causing a drain on the Debtor's resources." Hurricane Harvey was the cherry on top, disrupting operations in 17 locations. Now, the company intends to use bankruptcy to continue to evaluate its store footprint, shed some stores, and pursue a sale of the remaining locations. 
  • Jurisdiction: N.D. of Texas (Judge Mullin)
  • Capital Structure: $10.8mm debt (Cadence Bank NA), $777k PIK subordinated promissory note.    
  • Company Professionals:
    • Legal: Husch Blackwell LLP (Vickie Driver, Christina Stephenson, Ryan Burgett, Alexander Terras)
    • Financial Advisor: Mastodon
    • Claims Agent: Donlin Recano & Co. Inc. (*click on company name above for free docket access)
  • Other Parties in Interest:
    • Prepetition/DIP Lender: Cadence Bank NA
      • Legal: Morris Manning & Martin LLP (Frank DeBorde, David Mayo) & (local) Gardere Wynne Sewell LLP (Holland O'Neil, Jason Binford)  
    • Official Committee of Unsecured Creditors
      • Legal: Gray Reed & McGraw LLP (Jason Brookner, Michael Bishop, Lydia Webb)

Updated 11/17/17