OnCure reorganization plan confirmed over physician, landlord concerns

By Jim Witters

Wilmington, Del., Oct. 3 - OnCure Holdings, Inc. received confirmation of its Chapter 11 plan of reorganization despite objections from a group of landlords and a challenge from physicians affiliated with some of the company's business partners.

Judge Kevin Gross overruled the objections and confirmed the plan during an Oct. 3 hearing in the U.S. Bankruptcy Court for the District of Delaware.

Debtors attorney Keith A. Simon said there is no targeted effective date for the plan, but the parties hope to close on the stock purchase agreement as quickly as possible.

As previously reported, Radiation Therapy Services, Inc. has agreed to buy 100% of the shares of the reorganized holding company and pay $42.5 million in cash and guarantee $82.5 million of amended secured notes.

The sale proceeds leave senior secured noteholders with a $100 million deficiency on their claims, but the transaction and reorganization presented the best alternative for OnCure creditors, attorneys for the debtors and the noteholders said during the hearing.

Judge Gross called OnCure "a textbook case of how a bankruptcy should work."

"This is a reorganization that results in a feasible and viable post-confirmation entity that will continue to be effective," Gross said.

Physicians' objection

Some physicians seeking to sever ties with groups affiliated with OnCure have sued to prevent OnCure from stopping them from leaving the physician groups.

Attorney Scott Cousins argued that the plan of reorganization did not meet the requirements of the bankruptcy code because the disclosure statement failed to specifically mention the ongoing litigation with the physicians.

Simon said the disclosure statement approved by the court in August did discuss the potential negative affect of an exodus of physicians from agreements with its business partners. He said there was no requirement to delineate specific examples.

The adversary action is a matter of public record and available to any interested party, Simon said.

Judge Gross agreed with the debtors.

Landlords issues

A group of OnCure's landlords, referred to as the Kepes parties, objected to plan confirmation because the reorganization plan fails to address the disposition of several linear accelerators OnCure installed at leased properties.

Frederick Rosner, presenting the Kepes parties, said the accelerators are used in the treatment of cancer patients. The machines contain radioactive materials, he said.

The landlords fear that if the debtors reject the leases for the sites, the landlords may be left with radioactive materials they are not licensed to dispose of.

Simon told the court that the reorganization plan contains no provision concerning abandonment of property or other assets. And the debtors have filed no motions seeking to abandon the accelerators.

The reorganized debtor under RTA ownership will have to determine how to deal with the equipment at any sites where the leases are rejected, Simon said.

Judge Gross said that he doubted the regulatory agencies tasked with oversight of radioactive materials would permit the debtors or the reorganized debtor from walking away from the accelerators without arranging for their safe and proper removal.

The judge also said that the rejection of the leases will not be effective until OnCure has cleared its possessions out of the properties.

Creditor treatment

Treatment of creditors under the confirmed plan includes the following:

• Debtor-in-possession facility claims will be paid in full in cash;

• Pre-bankruptcy term loan claims will be paid in full on the effective date, to the extent not previously paid in full under DIP facility orders;

• The principal amount of pre-bankruptcy secured notes will be reduced to $82.5 million.

Noteholders will receive a share of base notes and a net cash amount.

After the effective date, noteholders will receive a share of either the sum of the amount by which the final purchase price exceeds the initial purchase price if the final price is greater plus an escrow amount or, if the final purchase price is equal to or less than the initial price, an amount equal to the escrow amount following distribution to the investor.

Noteholders also will receive an unused cash reserve amount and a share of any escrowed notes;

• Holders of general unsecured claims and old holding company interests will not receive any recovery; and

• Old affiliate interests in any holding company subsidiary will remain effective and still be owned by the same holder that owned them immediately before the effective date.

OnCure is an Englewood, Colo.-based provider of business management services and medical equipment to oncology physician groups that treat cancer patients. The Chapter 11 case number is 13-11540.

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