Liberty Medical Supply, affiliated entities file Chapter 11 bankruptcy

By Caroline Salls

Pittsburgh, Feb. 15 - Liberty Medical Supply, Inc. and nine affiliated entities filed Chapter 11 bankruptcy Friday in the U.S. Bankruptcy Court for the District of Delaware.

The company said its senior management acquired the Liberty business and formed ATLS Acquisition, LLC and FGST Investments, Inc. to facilitate the acquisition in December. The management team also purchased the equity of the other Liberty Medical debtors.

The transaction was financed by Alere, Inc.

Almost immediately after the closing, Liberty Medical said the debtors faced significant economic pressure from an ongoing disputed post-pay audit related to audit years 2008, 2009 and 2010 and a pending civil lawsuit.

In addition, Liberty Medical said Medco Health Solutions, Inc. refused to perform significant contractual obligations under the terms of the transaction, the Center for Medicare and Medicaid Services insisted on recouping substantial monthly amounts in connection with the disputed post-pay audits, and Alere tried to exercise a contractual option to acquire substantial company assets in a way that Liberty Medical claims is inconsistent with the governing agreement.

As a result, the company said the Chapter 11 cases were filed to give the debtors breathing room to implement their business plan and to address claims.

According to court documents, Liberty Medical has $100 million to $500 million in both assets and debt.

The company's largest unsecured creditors include

• CGS Administrators of Nashville, with a $137.19 million post-pay audit claim;

• Medco Health Solutions of Atlanta, with a $14.25 million trade and transition services agreement claim;

• Lifescan Inc. of Milpitas, Calif., with a $6.74 million trade debt claim;

• Massachusetts Department of Revenue, with a $5.87 million tax claim;

• Abbott Laboratories of Abbott Park, Ill., with a $5.06 million trade debt claim;

• Amerisourcebergen of Chesterbrook, Pa., with a $1.87 million trade debt claim; and

• Roche Diagnostics Corp. of Indianapolis, with a $1.62 million trade claim.

The company is represented by Greenberg Traurig.

Liberty Medical is a Port St. Lucie, Fla.-based health-care products home delivery provider. The Chapter 11 case number is 13-10262.

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