Large Company Turnaround - Trident USA Health Services
James Peck, Morrison & Foerster LLP
Frank A. Oswald, Togut, Segal & Segal, LLP
David M. Posner, Kilpatrick Townsend & Stockton LLP
James J. Mazza, Skadden, Arps, Slate, Meagher & Flom LLP
Mark Buschmann, PJT Partners
Russell Perry, Ankura Consulting Group LLC
William Jordan, Alston & Bird
David MacGreevey, AlixPartners, LLP
Robert Britton, Paul, Weiss, Rifkind, Wharton & Garrison LLP
David Hilty, Houlihan Lokey
About the Turnaround:
On September 20, 2019, TridentUSA Health Services, the nation’s largest mobile diagnostic healthcare services provider, completed a successful restructuring, which delivered the company’s balance sheet by approximately $600 million, saved nearly 5,600 jobs, and preserved Trident’s going-concern operations.
This turnaround was a rare operational restructuring of a services business facing liquidity constraints attributable to industry headwinds. In particular, the company experienced a sustained decline in its financial performance, which had been compounded by significant challenges collecting receivables from a distressed skilled nursing facility customer base. Those factors restricted the company’s ability to service its debt and make capital expenditures necessary for its technology-driven business.
Even after an out-of-court recapitalization in April 2018 that injected $40 million of new money, the company continued to face persistent headwinds which affected customers, write offs of significant receivables, increased pressure on reimbursement rates, intense capital requirements, and constrained liquidity.
Accordingly, in February 2019, Trident and 22 of its affiliates filed for Chapter 11 with approximately $800 million of prepetition debt. To address its operational issues, less than 40 days into the cases the company and its advisors delivered a business plan that was premised on a “shrink to grow” strategy designed to turn around their operations. The company began to implement this turnaround plan, which focused on: (i) right-sizing its footprint to refocus on its profitable operations; (ii) rationalizing its x-ray, lab, and ultrasound service offerings; and (iii) improving collections.
From a legal perspective, Trident’s turnaround story is one that involved the complex intersection of healthcare, finance, and bankruptcy law.
First, Trident faced challenges to its 2018 recapitalization asserted by secured lenders that had previously consented, as well as the creditors’ committee, arguing that the 2018 recapitalization should be unwound. After significant litigation and negotiations, the parties resolved these matters, providing increased recoveries that included payments to unsecured creditors of nearly 10 times what was originally proposed.
Second, two qui tam relators filed prepetition complaints seeking $489 million under the False Claims Act, alleging that Trident engaged in an illegal “swapping” scheme to price services below cost in exchange for referrals of Part B Medicare business. The relators also sought a determination that their claims were non-dischargeable, which threatened Trident's reorganization. After weeks of mediation with the qui tam relators and the U.S. government overseen by Hon. James Peck, the company settled the claims for $9.5 million and received full releases.
With these accomplishments, Trident’s Chapter 11 plan was accepted by its secured creditors and by general unsecured creditors on a consolidated basis. Judge Sean Lane confirmed the plan, and the company emerged from bankruptcy. As a result, Trident continues to provide essential medical diagnostic services to key customers, ensuring patients’ access to these critical services.