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The Hospital at Westlake Medical Center filed for chapter 11 protection Friday, the Austin American-Statesman reported, but will not be closing. "Our commitment to being a dedicated partner to our patients and community remains unwavering, both during this process and beyond," the hospital said in its information sheet about the bankruptcy. Westlake Medical Center is physician-owned and offers an outpatient surgical center, orthopedic and spine surgeries, imaging, and an emergency room. The hospital is sending out notifications to its employees, vendors, patients and physicians about the chapter 11 filing. No creditors were listed on Friday afternoon on the bankruptcy's website portal. The American Hospital Directory shows the hospital as having 23 beds, and in 2021 it had a net income of minus $2.5 million. The hospital cited the pandemic and cost increases as the reasons for the need to file for bankruptcy. "Over the past 18 months, the healthcare industry has been dramatically impacted by the ongoing economic pressures of the COVID-19 pandemic, exacerbating financial challenges for many businesses in our sector, including us," the hospital said in its information sheet. "Our operations have also been severely impacted by increasing labor, supplies, and drug costs, as well as continued workforce shortage." Read more.

The financially troubled healthcare sector will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.

The same day in July that Mercy Iowa City’s largest bondholder asked for a receiver to take over the hospital’s operations — a move hospital officials said compelled them to file for bankruptcy protection days later — a pair of recently terminated Mercy executives also filed suit against their former employer, accusing the hospital of ghosting them and shorting them payments that were promised, the Cedar Rapids (Iowa) Gazette reported. “Mercy Hospital has not paid the additional payments that are due and owing Miller and Andronowitz under the offer letters and severance agreements,” according to the July 24 lawsuit. “Mercy Hospital has not responded to Miller and Andronowitz’s demand for payment or provided any explanation for its continued non-payment.” Dawna Miller and Judy Andronowitz were Mercy’s chief financial officer and clinic chief operating officer, respectively, until August 2022 — around the time the hospital told employees its search for a new strategic partner had come up dry and it would remain an affiliate of Des Moines-based MercyOne. In an email dated July 28, 2022 — obtained by The Gazette — Mercy’s then-acting President and Chief Executive Officer Mike Trachta, who since has returned to his primary MercyOne position as vice president of network affiliates, announced the failed search and other staff changes. “I wanted to update you on two leaders who are leaving Mercy Iowa City,” Trachta wrote then. “I want to thank Dawna Miller and Judy Andronowitz for their contributions to our organization. Please join me in wishing them well.” A year later, both women report in their lawsuit being terminated in August 2022 and entering into severance agreements “wherein Mercy Hospital agreed, among other things, to pay the 12 months severance pay initially promised in (their) offer letters.”

Bankrupt cryptocurrency lender Genesis Global Holdco LLC sued its parent, Digital Currency Group, seeking to recover about $620 million in outstanding loans despite ongoing settlement talks, Bloomberg News reported. Genesis sued Barry Silbert’s DCG and DCG International Investments Ltd. on Wednesday in New York bankruptcy court but asserted that the companies will keep discussing a potential deal that could end the dispute. The lawsuits were filed after Genesis unveiled a $1.4 billion debt repayment plan backed by some of its customers but which isn’t supported by other key creditors. “Genesis has agreed to stay the turnover action so that we can move forward with documenting the deal in principle that was reached with Genesis, the UCC, and DCG,” a spokesperson for DCG said in an emailed statement. DCG will begin repaying the loans after a standstill agreement is filed with the bankruptcy court, the spokesperson said. The lawsuits concern loans to DCG that Genesis says matured in May. The outstanding debt includes a $500 million loan to DCG and loan to DCGI comprised of about 4,550 Bitcoin, according to the lawsuits. Genesis is also seeking to recover accrued interest and late fees.

Lenders to Indian education-technology company Byju’s have alleged that it covertly transferred $533 million to a Florida-based hedge fund, adding another dimension to their legal feud with one of India’s most highly valued startups, WSJ Pro Bankruptcy reported. A lender lawsuit filed in a Miami court last week alleges Byju’s sent $533 million that should have been in its U.S. affiliate’s bank accounts to Camshaft Capital, described as a Miami-area hedge fund, and concealed the whereabouts of that money from the company’s lenders. The case, filed by the lenders’ agent, Glas Trust Company, seeks to unwind the alleged transfer to Camshaft Capital, to recover any associated fees and to “otherwise ascertain what happened” to $533 million that purportedly served as collateral for a $1.2 billion loan. Byju’s is battling its lenders across several courts after they called defaults against the company earlier this year and sought to take control of its U.S. affiliate, Byju’s Alpha, citing its alleged failure to make required financial disclosures. Byju’s has disputed that it breached its obligations and accused the lenders of manufacturing defaults to try to extort the company for payments.

Opponents of the Boy Scouts of America’s plan for a $2.4 billion sex-abuse settlement recently found fresh legal ammunition when the Supreme Court agreed to examine a similar plan drawn up by Purdue Pharma, WSJ Pro Bankruptcy reported. Some of the Boy Scouts’ insurers and a small group of sex-abuse victims have renewed calls in federal court to temporarily block the youth group’s chapter 11 plan, saying it shouldn’t advance any further until the Supreme Court weighs in on Purdue’s plan for mass opioid liabilities. Their attempt is the latest example of how the Supreme Court’s decision to hear a challenge to Purdue’s chapter 11 plan is rippling through the bankruptcy system. The Supreme Court last month said it would examine whether bankruptcy law can be used to resolve creditors claims’ against third parties that aren’t in chapter 11 without the consent of all claimants. Such releases are central to the bankruptcy plans crafted by both the Boy Scouts and Purdue. Purdue’s plan would release its Sackler family owners from opioid-related liabilities in return for up to $6 billion in settlement payments. In the Boys Scouts’ plan, local councils and partner organizations of the organization would be shielded from the claims of the sex-abuse claimants. In court papers filed Friday, the Boy Scouts argued that, unlike the Purdue case, the youth group’s plan can’t be halted as the wheels are already in motion to collect the settlement funds and distribute them to plaintiffs.

When private equity firm Prospect Medical Holdings Inc. bought a cash-strapped hospital outside Philadelphia, it promised a return to profitability that would ensure the long-term sustainability of a facility that thousands of people counted on. Seven years later, Delaware County Memorial Hospital is closed, Prospect is in debt and a community group is suing, Bloomberg News reported. It’s a story playing out across the country as Wall Street’s recipe for making big bucks flipping hospitals collides with labor costs and surging interest rates. Combined with increased scrutiny on private equity tactics, ailing hospitals are finding themselves left without access to buyers of last resort. And that’s threatening to leave low-income communities without critical care such as emergency rooms. “Private equity is looking at some of these hospitals now saying, ‘I don’t know what my exit is. There’s too many unknown variables. And the one thing private equity guys don’t like is unknown variables,” said Jim Clayton, who leads the private equity advisory practice at consulting firm BDO USA. “They thought that they could pretty them up and sell them to a larger health system. But the larger systems aren’t buying them. Because they don’t want the headache either.” Private equity owns almost 400 of the approximately 5,100 hospitals — or about 30% of all for-profits — in the U.S., according to the Private Equity Stakeholder Project, with more than 100 in non-urban areas. Rural and other safety-net hospitals are most at risk of closure because they have fewer privately insured patients, and, in the case of rural facilities, lower patient volumes.
Read more.

The financially troubled healthcare sector, including the role of private equity, will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.

Clothing retailer Soft Surroundings has filed for bankruptcy with plans to close its 44 leased stores and to sell its online and catalog business to Coldwater Creek, WSJ Pro Bankruptcy reported. The St. Louis-based company, which caters to upper-middle-class women around the age of 60, sought protection from creditors Sunday in the U.S. Bankruptcy Court in Houston. Soft was founded in 1999 as a catalog company and opened its first retail store in 2005. Private-equity firm Brentwood Associates, backer of consumer businesses such as OrangeTheory Fitness and Blaze Pizza, became the majority owner in 2012. Soft recorded roughly $220 million in sales last year, of which two-thirds were made online. In the latter part of last year, it closed more than 20 stores. “Shifts in the competitive landscape, a move towards online channels, the Covid-19 pandemic, and increased costs of goods and services due to inflation all impacted the company’s financial position,” Chief Restructuring Officer Curt Kroll said in a sworn declaration. The company plans to close the remaining stores by late February 2024, according to a court filing.

Hog Father's Old Fashioned BBQ, a Washington County, Pa.-based restaurant that includes a total of three locations, has filed for chapter 11 bankruptcy protection from creditors in the United States Bankruptcy Court for the Western District of Pennsylvania, the Pittsburgh Business Times reported. Filed on Sept. 1, the legal action encompasses four separate filings for the local Washington County chain, which has locations in Washington, Canonsburg and Monongahela. The restaurants remain open and operating amid a chapter 11 filing that reveals estimated liabilities of between $500,000 and $1 million, the largest claim of which is for more than $683,000 by Reinhart Food Service LLC, a major food distributor. It's a restaurant that first opened in Washington County in the early days of the Marcellus Shale gas play in 2007, and the barbecue joint often thrived and expanded by serving the often Texas-based clientele who migrated to the region to work on the new natural gas rigs that expanded in western Pennsylvania at the time. So much so that the restaurant acknowledged that 40% of its business came from the oil and gas sector in the Pittsburgh Business Times in 2015, a period in which Hog Father's five locations included one in the lobby of the Washington County regional headquarters of Range Resources Corp., but for which two other restaurant openings were put on hold amid a decline in natural gas prices. It remains a very different world for natural gas production in western Pennsylvania, as the Marcellus play has evolved to more midstream activity and to the operation of the Shell cracker plant in nearby Beaver County. Other barbecue restaurants are expanding and opening in the region, including long-time North Side favorite Wilson's B-B-Q, which reopened recently on Perrysville Avenue after its previous location was lost in a fire in 2019.

The co-founders of Israeli artificial intelligence startup Vesttoo ran a forgery scheme that included a fake bank employee persona named “Alex Garcia” to obtain billions of dollars in bogus letters of credit for insurance deals, the now-bankrupt company said, WSJ Pro Bankruptcy reported. Vesttoo’s investigation into the fraud allegations that drove it to bankruptcy last month alleged that co-founders Yaniv Bertele and Alon Lifshitz and other senior executives had engaged in a scheme to generate fraudulent letters of credit from China Construction Bank and other financial institutions. The company also said it is considering litigation against China Construction Bank and U.K.-based Standard Chartered based on evidence turned up in the internal investigation that employees at both banks may have been involved in the fraudulent scheme, according to Thursday’s report, filed in the U.S. Bankruptcy Court in Wilmington, Del. It marks Vesttoo’s initial findings into what went wrong at the company. Bertele said in a statement Thursday that he rejects the report’s allegations and that Vesttoo’s investigation “was flawed from the outset and targeted the company’s founders as its objective.” His statement said the investigation was part of a “takeover within the company amidst a dispute between shareholders.” Lifshitz also said the report’s accusations are unfounded and that the investigation was biased and served the interests of other shareholders. Both Bertele and Lifshitz are contesting their dismissals from the company under Israeli law, according to the report.