An investor is criticizing Quorum Health’s Chapter 11 reorganization proposal, saying the hospital company’s executives and debt investors led by Kohlberg Kravis Roberts are rushing the process “to drive an opportunistic false valuation” helped by the temporary impact of COVID-19.
In a filing in bankruptcy court in Delaware, attorneys for Mudrick Capital Management say there is no need to rush the plan — Quorum has asked for a confirmation hearing May 11, less than five weeks after its initial filing — and argue that its backers are pushing it to avoid “any meaningful analysis of the debtors’ actual value and the destruction of shareholder value.”
Mudrick, which owns a shade under 10 percent of Quorum’s stock and last month called on the company to avoid a bankruptcy filing, and other equity investors stand to be wiped out if the plan is approved as proposed. They also do not have a vote in the proposed reorganization, which also calls for holders of senior notes to take a massive haircut.
Mudrick has asked the U.S. Trustee to form an official committee of equity investors and is calling on Judge Karen Owens to not approve steps that would “needlessly” put Quorum on a path toward the May 11 target date.
“[T]he court must ensure that the debtors’ proposed schedule provides equity holders with sufficient time to adequately protect their own interests,” Mudrick’s attorneys wrote. “More fundamentally, an expedited schedule is not prudent here. Despite the fact that the plan is prepackaged, it is not consensual. The debtors’ representations to the contrary ignore a critical constituency.”
Mudrick’s filing also reiterates the firm’s point — previously made in a Securities and Exchange Commission filing last month — that Quorum’s equity has value and that, COVID aside, the company’s performance should soon begin improving.
Quorum’s attorneys have not yet responded to the filing.