Quorum Health Corp. won a bankruptcy judge’s approval to exit bankruptcy with its debt cut by $500 million, beating back a hedge-fund shareholder that said the hospital operator had deliberately undervalued itself, WSJ Pro Bankruptcy reported. Judge Karen Owens of the U.S. Bankruptcy Court in Wilmington, Del., indicated she would confirm the company’s chapter 11 exit strategy after holding a trial that centered around Quorum’s valuation and the federal coronavirus relief dollars it has received. Hedge fund Mudrick Capital Management LP, which owns a 15 percent stake in Quorum, argued that the company wasn’t justified in wiping out equity and handing control to bondholders, given its infusion of government aid. Mudrick also argued that the company acted in bad faith, saying that Quorum understated what it would get in federal grants, hid grants that it did get, and “consistently invented” amounts it could have to return to the government. By doing so, Mudrick said, Quorum was playing down its liquidity and depressing its value to leave shareholders out of the money. Under the chapter 11 plan, bondholders that include Davidson Kempner Capital Management LP and GoldenTree Asset Management LP are in line to take over the company when it leaves bankruptcy.
