💊New Chapter 11 Bankruptcy Filing - Partners Pharmacy Services, LLC💊
Pharma co files chapter 11 amidst fraud allegations in third attempt to sell its assets
On August 13, 2025, Partners Pharmacy Services, LLC and thirteen affiliates (collectively, the “debtors”) filed chapter 11 sale cases in the Southern District of Texas (Judge Lopez). Founded in ‘98, the debtors serve “… the medication needs of residents at skilled nursing facilities, assisted-living communities, long-term care residences, long-term acute care facilities, and institutional facilities throughout the United States.”
Up until COVID, they were “… the third largest long-term care pharmacy company in the United States serving up to 48,000 residents at facilities in sixteen states and the District of Columbia,” although its largest customer was always its affiliate and senior care operator CareOne Management, LLC (“CareOne”).
But (i) pandemic fallout (🥱), (ii) a 19-to-54% demographic pivot of Medicare Part A and B beneficiaries to Medicare Part C plans, which provide a less predictable reimbursement structure to the debtors, and (iii) private equity sinking its teeth into the nursing home industry and shifting homes to alternative pharmacies did a number on the business.
From Q4’21 through the end of ‘22, the debtors lost 6.5k patients and accrued a $29mm balance owing to Cardinal Health 110, LLC and Cardinal Health 112, LLC (collectively, “Cardinal”), the supplier for 95% of their pharmaceutical needs … in addition to $37mm owed under a by-then-defaulted senior revolver with CIT Bank, N.A. (“CIT”).
In late ‘22, the debtors tried to right size by closing six locations, which reduced their daily pharma needs from $500k to $260k, but negative cash flow persisted.* In December ‘23, they onboarded Gibbins Advisors, LLC to assist with liquidity and figure out what the f*ck to do.
Apparently the solution was trying to sell the biz. A few times. In June ‘24, the debtors commenced negotiations with PharMerica, “… one of the largest institutional pharmacy companies in the United States,” and chose an “aggressive” target closing date for the end of ‘24.
We don’t mean the ‘24 closing date. After multiple delays, the whole deal fell apart and PharMerica walked in April ‘25.
Take two. The next month, in May ‘25, the debtors executed a term sheet with Speciality RX (“SRX”), another player in the space, and through June ‘24, SRX paid a total of $5mm in deposits while the parties worked to negotiate an asset purchase agreement. Guess what.
On August 5, 2025, SRX, just like PharMerica, walked and, naturally, “… demand[ed] immediate return of …” its $5mm. And, just as naturally, that too, uh, apparently never happened.
Which left CIT holding the bag. Except not really because it also peaced out in July ‘23 by assigning its then ~$37.6mm in debt to CS One, LLC (“CS One”), an entity owned by the debtors’ and CareOne’s 100% shareholder Daniel Straus.** And since that assignment, no amounts have been paid back, so the balance has grown to a tidy ~$44.5mm, including $1.5mm in early August ‘25-provided bridge financing. Here’s the full petition date debt stack:***
But Mr. Straus ain’t quite done digging holes.**** In bankruptcy, CS One is providing a $6.5mm multi-draw term loan (all approved at interim). The DIP bears interest at 12% PIK and, aside from reimbursement of prof expenses, doesn’t have any fees or a roll-up. Together with the prepetition revolver, the DIP will serve as the basis for CS One’s ~$51mm stalking horse credit subject to the following timeline:*****
Perhaps this one will stick. Although that is anyone’s guess because, while the court held a quickie 49-minute first-day hearing on August 14, 2025, at which all requested relief was granted, McKesson Corporation (“McKesson”), a stiffed supplier represented by Buchalter (Jeff Garfinkle), showed up to revisit the PharMerica sale and drop a truckload of shade on the debtors:
“That [PharMerica] transaction fell apart in April of this year after Mr. Straus’ daughter and several other parties filed a very, actually, mind-boggling federal court lawsuit against the debtor[s] alleging a lot of improprieties here on the part of management … It alleges very significant federal Medicare violations. It alleges improper conduct with members of management …
In addition, the debtor’s former interim CEO filed another lawsuit against the debtors and various affiliates. That lawsuit … apparently was settled on August 4. We don't know the terms of that settlement. Again, that lawsuit led to very serious allegations of intercompany wrongdoing …
We expect the committee counsel … will investigate these allegations that are set forth in two different federal court lawsuits.”
However, he stopped before objecting to anything, leaving us to wait for the committee to get up and going. But we’re a patient crew: the second day and bidding procedures hearings will go forward on September 10, 2025 at 1pm CT.
The debtors are represented by Pillsbury Winthrop Shaw Pittman LLP (Patrick Potter, Dania Slim, James Dickinson, Amy West) as legal counsel, Gibbins (Ronald Winters, Tyler Brasher) as financial advisor and CRO, and SSG Capital Advisors, LLC (Mark Chesen, Matthew Karlson) as investment banker. Harvey Tepner is the debtors’ independent manager, and he and Mr. Winters compose their restructuring committee. CS One, LLC, as prepetition and DIP lender, is represented by Glenn Agre Bergman & Fuentes LLP (Andrew Glenn, Malak Doss) and Kane Russell Coleman Logan PC (Michael Ridulfo, Mark Taylor). McKesson is represented by Buchalter (Jeff Garfinkle).
*Presumably a RIF or two along the way too. The debtors peaked at ~800 employees, but as of the petition date, they’re down ~65% to ~284.
**CS One and Mr. Straus provided “… [c]ertain guarantees …” of SRX’s $5mm deposit, although the terms aren’t disclosed.
***The GUC claims are primarily owed to vendors, but also include contingent litigation claims relating to prepetition lawsuits filed by McKesson Corporation, an affiliate, and “other parties” for breach of contract, which allege ~$11.7mm in claims.
****The debtors incurred net losses of $10.4mm in ‘22, $7.5mm in ‘23, and $6.7mm in ‘24.
*****The stalking horse bid doesn’t have any bid protections.
Company Professionals:
Legal: Pillsbury Winthrop Shaw Pittman LLP (Patrick Potter, Dania Slim, James Dickinson, Amy West)
Financial Advisor and CRO: Gibbins Advisors, LLC (Ronald Winters, Tyler Brasher)
Investment Banker: SSG Capital Advisors, LLC (Mark Chesen, Matthew Karlson)
Independent Manager: Harvey Tepner
Claims Agent: (Click here for free docket access)
Other Parties in Interest:
DIP Lender: CS One, LLC
Glenn Agre Bergman & Fuentes LLP (Andrew Glenn, Malak Doss) and Kane Russell Coleman Logan PC (Michael Ridulfo, Mark Taylor)
Supplier: McKesson Corporation
Legal: Buchalter (Jeff Garfinkle)