Primary care provider and population health company Cano Health entered into a restructuring support agreement with lenders holding approximately 86% of its secured revolving and term loan debt and 92% of its senior unsecured notes.
To facilitate this restructuring, Cano Health initiated prearranged voluntary Chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court for the District of Delaware. It also received a commitment for $150 million in new debtor-in-possession financing from certain of its existing secured lenders, which is subject to court approval. This new capital is expected to provide sufficient liquidity to support the company’s ongoing operations throughout the restructuring process.
“We have taken decisive actions over the past few months to advance our previously disclosed transformation plan and strengthen our financial position,” Mark Kent, CEO of Cano Health, said. “By entering this court-supervised restructuring process, we are positioning the company to achieve those goals on an accelerated basis and focus on what we do best: improving health outcomes for patients at a lower cost. I am confident we will emerge from this process a stronger organization with the necessary resources in place to continue delivering the quality of care our patients expect and deserve. We appreciate the support of the majority of our creditors as we pursue this goal.”
Since Kent assumed the permanent CEO role in August 2023, Cano Health has advanced its strategy to focus on its core Florida Medicare Advantage and ACO REACH lines of business, including divesting operations in Texas and Nevada and exiting the California and Puerto Rico markets. As a result of its ongoing operational transformation plan, the company expects to achieve approximately $290 million of annualized cost reductions by the end of 2024.
Cano Health is filing with the Court a series of customary first day motions to maintain business-as-usual operations on all fronts, including:
- Paying associate wages, including doctors and nurses, without interruption.
- Continuing operations and honoring obligations to affiliate physician groups.
- Ensuring patients at its clinics continue to receive care.
- Seeking authority to pay the existing pre-petition claims of certain vendors that are critical to the operation of the company’s medical centers. The company has authority to continue making ordinary course payments for all authorized goods and services provided on or after the filing date.
Cano Health expects to file and receive court approval of a plan of reorganization and disclosure statement expeditiously while also exploring paths to maximize value. The company also expects to emerge from the restructuring process in Q2/24.
The RSA provides for the conversion of nearly $1 billion in secured debt to a combination of new debt and full equity ownership in the reorganized company. It also allows for solicitation of strategic partnerships and potential offers — including the sale of the company or substantially all its assets — that may result in a value-maximizing outcome to the company’s stakeholders.
Weil, Gotshal & Manges is serving as legal counsel to Cano Health, while Houlihan Lokey Capital is serving as investment banker and AlixPartners is serving as financial advisor.
Gibson, Dunn & Crutcher is representing the ad hoc lender group as legal counsel, while Evercore serves as investment banker and Berkeley Research Group serves as financial advisor.