Miami-based medical service center CareMax has filed for Chapter 11 bankruptcy in Texas. After very significant second-quarter losses amounting to $170.6 million in August, the organization issued a going-concern warning that sent alarm bells ringing regarding the future of the company.
This month, CareMax’s bankruptcy update came after it reported that it would be unable to file its third-quarter report with the U.S. SEC as a result of its lack of funds. In its filing, the company listed debts of $693 million and assets of $390 million.
CareMax Files for Chapter 11 Bankruptcy
CareMax Inc., a provider of medical care centers for the elderly, has filed for Chapter 11 bankruptcy in the US Bankruptcy Court for the Northern District of Texas. Despite efforts to cut costs and refinance its pending debt, the company’s liabilities have exceeded its assets, placing a financial burden on the organization to keep the business up and running. The company is now seeking court protection to help maintain its operations while it restructures its resources and sells off assets to interested parties.
The latest news on the CareMax Chapter 11 filing indicates that the customary motions with the Court include authorization to maintain business-as-usual operations. This refers to a continuation of its functions to ensure patients receive high-quality, value-based healthcare.
The authorization request also mentions payment of associated wages for employees including doctors and nurses without interruption and payment of existing pre-petition claims of certain vendors that are critical to the health and safety of CareMax’s patients as well as to the continued operation of the business.
CareMax’s Bankruptcy Plan Also Includes Asset Sales
Along with the internal changes, CareMax has also released news of its restructuring efforts to save the company. An affiliate of Revere Medical, a healthcare provider, is set to buy a portion of the company’s assets.
This transaction includes a portion of CareMax’s management services organization (the “MSO Business”) which supports the Medicare Shared Savings Program for around 80,000 Medicare beneficiaries. The sale of the business is expected to be completed simultaneously with the consummation of CareMax’s prearranged bankruptcy plan.
In addition to this, CareMax’s bankruptcy asset sales also include a “stalking horse” agreement with a third-party buyer for its clinical operating business. This type of agreement sets a baseline bid for the assets, allowing other interested buyers to submit a higher bid to stake their own claim.
The proposed terms of this agreement and the identity of the potential purchaser will be disclosed in the coming days if details of the deal are finalized. The bid will be subjected to an auction process so that the other parties can make their offer.
If the stalking horse bid remains unfinalized, CareMax’s secured lenders who have already provided crucial financial support will step in and acquire the same “Core Center Assets” through a credit bid.
Despite CareMax’s Chapter 11 Bankruptcy News, the Company Remains Optimistic
The successful sales of the Core Center Assets and MSO business should provide CareMax with the additional funds it needs to repay its debts. The company has also assured its customers that it will ensure continuity through the transactions to ensure the least amount of interruption to their services.
“After a careful review of the Company’s strategic alternatives, we have determined that the transactions announced today are our best opportunity to protect the long-term value of the CareMax assets and ensure our patients, providers, and health plans can continue to rely on the comprehensive, coordinated care we provide. We are deeply appreciative of the outstanding team members across CareMax, whose hard work and commitment to our partners is resolute.”
— Carlos de Solo, CEO of CareMax.
CareMax’s secured lenders have agreed to provide a $30.5 million DIP financing (Debtor-in-Possession loan) that should provide the necessary funds for the company to continue its operations during the bankruptcy process.
