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New LifeCare creditors committee objects to proposed DIP financing
By Sarah Lizee
Olympia, Wash., May 24 – The official committee of unsecured creditors for the Chapter 11 case of Hospital Acquisition, which operates numerous New LifeCare and LifeCare medical facilities, objected to the terms of proposed debtor-in-possession financing, according to an objection filed Friday in the U.S. Bankruptcy Court for the District of Delaware.
“The terms and conditions of the proposed DIP financing are inappropriate, overreaching and would shift all estate value to the DIP lender, leaving virtually nothing for unsecured creditors,” the committee said in its objection.
“Furthermore, the terms and conditions effectively circumvent any attempt to investigate the prepetition secured lenders’ purported liens and debt and to assert claims and causes of action, as appropriate, against those parties.
“Simply put, the proposed DIP financing, including the proposed final order, appears to be an attempt by the DIP lender to leverage the Chapter 11 process solely for its benefit to the detriment of the entire creditor constituency.”
On the petition date, LifeCare filed a motion seeking approval to enter into an up to $57.7 million DIP revolver on a senior secured super-priority basis. The revolver would provide $15 million of incremental liquidity.
Among other things, the DIP financing provides for a roll-up of all prepetition existing debt, consisting of about $26.7 million in outstanding revolving loans and about $9.4 million in issued and outstanding letters of credit.
The court entered into the interim order on May 8. A final hearing for the DIP financing is set for May 29.
LifeCare, a Plano, Tex.-based health care consulting and management services company, filed for bankruptcy on May 6. The Chapter 11 case number is 19-10998.
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