AAC

The lawyers and investment bankers for AAC Holdings have delineated the process for selling all or parts of the Brentwood company, which filed for bankruptcy last month.

In recent filings in a Delaware court, AAC representatives say they are looking for potential buyers to submit indications of interest by Aug. 14 and to make formal bids by Sept. 11. The group of five investment firms that control most of AAC’s pre-bankruptcy debt and have lent the addiction treatment services provider about $62 million since its Chapter 11 filing will then get to decide whether to go to an auction with one or more submitted bids or to push forward with a restructuring plan that will have them own outright a reorganized AAC.

If an auction takes place, it is scheduled for Sept. 21.

The five firms in charge of the process are, in order of their holdings of pre-Chapter 11 AAC debt:

• Brightwood Capital Advisors out of New York, which owns about $76 million worth of debt

• HG Vora Capital Management, a New York firm that has also been active of late in Tivity Health’s affairs ($62 million)

• CQS LLC, a credit-focused asset manager with four offices around the world (nearly $43 million)

• Main Street Capital Corp. out of Houston ($35 million)

• Dallas-based Capital Southwest Corp. ($20 million)

That quintet is continuing to look for possible acquirers for AAC with the help of investment bank Cantor Fitzgerald. Since March of last year, Cantor bankers have been scouring for buyers or private equity sponsors for AAC, which at one point was valued at more than $1 billion but ran into trouble after loading up on debt to pay $85 million for AdCare in 2017 and a year later having much of its possible patient pipeline pulled out from underneath it when Google changed a search algorithm. Cantor last year rounded up four formal indications of interest that went nowhere and this spring combed through a group of more than 50 possible buyers and sponsors. That process resulted in three proposals that didn’t pan out.

Not everyone is totally fine with Cantor’s involvement going forward, however. The recently appointed committee of unsecured creditors told the court this past Sunday that, while it is fine with Cantor running a sale process, it was the firm’s compensation structure to be adjusted.

As currently structured, Cantor is set to be paid both a restructuring fee and a sale fee should AAC’s assets be sold for less than the value of its roughly $400 million in secured debt. The creditors committee says that would be unreasonable and out of line with similarly-sized Chapter 11 cases.

The matter is on the agenda at a telephonic hearing Friday afternoon; an attorney for AAC says the issue has been resolved in principle.

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