Quorum Health and its largest shareholder continue to tussle in bankruptcy court over the hospital company’s reorganization plan, which would wipe out equity investors.
In a recent filing, attorneys for Mudrick Capital Management say Brentwood-based Quorum and a group of debt holders are trying to take advantage of the COVID-19 pandemic “to artificially depress the value of a fully solvent company and transfer 100 percent of the equity to creditors.” Mudrick, which owns 15 percent of Quorum’s shares, also say company executives and their chief restructuring officer have acted in bad faith when it comes to disclosing how much CARES Act funding they have received to help shore up their balance sheet during the pandemic.
“Any notion of remaining liquidity issues have evaporated — and yet, the debtors have not updated their disclosures,” Mudrick attorneys wrote, later adding that “the entire underpinnings” of the reorganization are now questionable. “The debtors still have not accounted for the fact that they are in possession of $100 million in cash that they did not account for when they filed the plan. This is the antithesis of good faith. It is the purposeful attempt to hide critical information from stakeholders.”
Mudrick also is contending the proposed restructuring plan doesn’t maximize Quorum’s value and would unfairly protect Quorum’s officers and directors from possible claims that they breached their fiduciary duties.
In addition to responding in court, Quorum officials told the Post the laid-out restructuring plan remains the best path forward for the company and its stakeholders.
“Quorum Health is working diligently through the Chapter 11 process as planned with the goal of strengthening its business to continue to serve patients […] The company has remained focused on enabling our community hospitals to continue the important work they are doing in addressing the COVID-19 crisis, acting as good stewards of the CARES Act funds Quorum Health has received to bolster that effort,” company officials said. “The company believes that recent efforts of Mudrick Capital Management to disrupt the process are self-interested and demonstrate a clear lack of understanding of CARES Act funds and how they can be used.”
Quorum early this month, before a hearing on an interim financing plan that was eventually approved, said assertions by Mudrick that CARES Act money is a salve for the company could “be generously labeled a ‘misunderstanding’” and added that Quorum remains in need of cash as its business suffers from the suspension of many activities at its hospitals.