The situation: Medical testing company faces strategic and liquidity challenges
Trident Holding Company, LLC, based in Maryland, USA, provides bedside diagnostics, imaging, laboratory and clinical services, and hospice care services across 35 states. Its revenue came from facility customers, government payors (including Medicare and Medicaid) and non-governmental commercial payors.
However, by 2017 some of Trident’s biggest customers began to suffer bankruptcies and financial distress—partly caused by falling occupancy rates at skilled medical facilities, as more patients opted for home healthcare—causing major liquidity problems for Trident.
In August 2017, Trident initiated several out-of-court capital structure solutions in an effort to restructure its business. These included an equity cure, recapitalization transactions, and operational improvement initiatives.
But, despite best efforts, the company continued to face a number of strategic challenges and liquidity issues and in February 2019 filed for Chapter 11 bankruptcy (along with 22 affiliated companies), with a restructuring support agreement with its priority first lien lender.
The approach: Detailed assessment of go-forward viability
AlixPartners’ deal team was retained in February 2019 by the Official Committee of Unsecured Creditors (UCC) to advise and assist in three areas:
- Assess Trident’s business plan for reasonableness and feasibility on enterprise and line-of-business levels, which included a reduced service offering, cost-saving operational improvements, and capital investments.
- Prepare a preliminary valuation analysis of the company’s enterprise, and estimation of the company’s pro-forma capital structure, based on an exit financing proposal from the priority first lien lender.
- Evaluate and challenge Trident’s short- and medium-term cashflow projections, including: an analysis of the company’s proposed DIP, assessment of the feasibility of proposed post-emergence capital structure and exit financing needs, an assessment of first day motions to determine the benefit of each motion to the estate and unsecured creditors, and provision of a preliminary overview of potential causes of action.
The team provided support when it really mattered, preparing a detailed report evaluating the company’s business plan, strategic initiatives, financial projections, liquidity needs and assessment of the management team. The UCC used this information to assess the go-forward viability of the pro-forma business.
THE SOLUTION: 5,000 jobs saved, and going-concern value preserved
All involved parties reached a global settlement where the priority first lien lender agreed to increase its cash contribution for the benefit of unsecured creditors, as well as waive virtually all potential preference claims.
Trident emerged from bankruptcy in September 2019, preserving its going-concern value, approximately 5,000 jobs, and securing $185m of exit financing.
The case was the winner of a 2020 TMA Turnaround and Transaction Award in the category of “Large Company Turnaround.”