AAC Holdings files Chapter 11, receives $62.5 million in financing

By Sarah Lizee

Olympia, Wash., June 22 – AAC Holdings, Inc., doing business as American Addiction Centers, and 49 affiliated debtors filed for Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware on Saturday, according to a press release.

The company said it had received support from its board of directors and lenders to move forward with a strategic recapitalization plan that is designed to significantly reduce the company’s debt and establish a sound financial platform for long-term growth.

The debtors entered into a restructuring support agreement with prepetition lenders holding in excess of 89% in aggregate principal amount of the loans outstanding under a prepetition senior-lien facility and a majority in aggregate principal amount of loans outstanding under a prepetition junior-lien facility.

The company is aiming to emerge in 125 days, after reducing its debt.

“While AAC has had ongoing financial difficulties, 2019 was a particularly difficult year,” chief restructuring officer J. Jette Campbell said in a declaration in support of the company’s filing.

“Specifically, changes in liquidity had a material adverse effect on AAC’s assets, business, cash flow, financial condition, prospects, and the results of operations despite AAC implementing cost-savings initiatives, targeting to sell the company’s real estate, exploring potential recapitalization, and obtaining additional financing.”

AAC has received an initial $62.5 million in incremental financing through a multi-draw superpriority senior secured priming debtor-in-possession term loan credit facility.

Ankura Trust Co., LLC is the administrative and collateral agent.

Loans will bear interest at 18% per annum with 10% payable in cash and 8% in kind.

The loans will be issued at a discount of 97.

The company is seeking interim access to $25.5 million of the loan.

Combining the financing with normal operating revenue, the company plans to continue operations at all treatment centers across the United States.

AAC listed at least $363.6 million in prepetition credit facility debt.

AAC’s largest unsecured claims creditors are Bank of America, NA of Nashville, with a $10 million claim, Adcare Holding Trust of Worcester, Mass., with a $8.13 million claim, King & Spalding LLP of Atlanta, with a $1.6 million claim, Connecticut General Life Insurance Co./ Cigna Health and Life Insurance Co. of Bloomfield, Conn., with a $1.45 million claim and Medequities Realty Trust, Inc. of Hunt Valley, Md., with a $1.34 million claim.

The company estimated $449,347,000 in assets and $517,398,000 in liabilities.

The debtors are represented by Dennis A. Meloro of Greenberg Traurig, LLP. Chipman Brown Cicero & Cole, LLP is acting as conflicts counsel, Carl Marks Advisors as restructuring adviser, Cantor Fitzgerald as investment banker and Donlin, Recano & Co., Inc. as claims agent.

AAC provides inpatient substance abuse treatment services and is based in Brentwood, Tenn. The Chapter 11 case number is 20-11648.

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