Downtown-based HDL recently retreated into Chapter 11.
Health Diagnostic Laboratory’s first attempt to secure a large pool of financing to be used during its bankruptcy is off the table.
The troubled lab company last week withdrew a pending agreement for a $30 million line of credit from New York-based Cerberus Business Finance. The money would have been used as debtor-in-possession financing while the company proceeds through Chapter 11 bankruptcy. The agreement had been set to be ruled on by Judge Kevin Huennekens on Monday.
HDL filed for bankruptcy June 7 after its largest lender, BB&T, cut the company off from its line of credit and attempted to deny it access to its bank accounts. Court documents state that HDL began seeking debtor-in-possession financing before its Chapter 11 filing, wiring a $150,000 expense deposit to Cerberus on June 5.
HDL’s corporate counsel Douglas Sbertoli said the company will now be working as fast as it can to secure DIP financing. He said HDL is currently in discussions with other potential lenders.
“The first offer isn’t always the best,” Sbertoli said.
During its initial bankruptcy hearing, HDL’s lawyers indicated that the company hoped to secure financing before a hearing on June 30 so it does not have to depend solely on cash collateral during the entire month of June.
HDL is selling of a large batch of its lab equipment used for blood testing. Photo courtesy of Ettin Group.
At a separate hearing on Monday, the judge approved an additional motion that will allow HDL some extra cash flow.
HDL received permission to proceed with the auction of about 30 pieces of laboratory equipment, using the Illinois-based Ettin Group as auctioneer. The sale could open up some room in HDL’s headquarters at 737 N. Fifth St. for a potential new tenant.
The company had to work through some objections from BB&T regarding the auction, and the two sides ultimately agreed that the firm will hand over either $325,000 or 30 percent of the auction’s net proceeds to the bank.
The auction started May 21 and is set to end June 26. The final sales should close within about a week of the auction.
The remaining auction proceeds will be placed into an escrow account over which BB&T will have control, and HDL will provide confidential updates of the auction process on a weekly basis to the bank, sharing the final results within two days of the closing date.
Sbertoli declined to say what the expected proceeds from the auction might be.
Ettin Group is to receive up to $45,000 from HDL, along with a 15 percent buyer’s premium on each item sold.
At another hearing last week, Huennekens approved an agreement between HDL and the federal government over Medicare reimbursements, despite objections from BB&T’s counsel.
The agreement stipulates that the U.S. government is now a secured creditor of HDL, giving it the right to recoup overpayment fees that it had paid to the lab company before its bankruptcy filing. In exchange, the government agreed not to freeze HDL’s Medicare reimbursement payments, which account for 40 percent of the company’s total revenue, according to court records.
The government is one of HDL’s largest creditors due to a $47 million settlement reached earlier this year that resolved a federal investigation into whether the company’s past practice of paying doctors to use its tests violated kickback laws.
Downtown-based HDL recently retreated into Chapter 11.
Health Diagnostic Laboratory’s first attempt to secure a large pool of financing to be used during its bankruptcy is off the table.
The troubled lab company last week withdrew a pending agreement for a $30 million line of credit from New York-based Cerberus Business Finance. The money would have been used as debtor-in-possession financing while the company proceeds through Chapter 11 bankruptcy. The agreement had been set to be ruled on by Judge Kevin Huennekens on Monday.
HDL filed for bankruptcy June 7 after its largest lender, BB&T, cut the company off from its line of credit and attempted to deny it access to its bank accounts. Court documents state that HDL began seeking debtor-in-possession financing before its Chapter 11 filing, wiring a $150,000 expense deposit to Cerberus on June 5.
HDL’s corporate counsel Douglas Sbertoli said the company will now be working as fast as it can to secure DIP financing. He said HDL is currently in discussions with other potential lenders.
“The first offer isn’t always the best,” Sbertoli said.
During its initial bankruptcy hearing, HDL’s lawyers indicated that the company hoped to secure financing before a hearing on June 30 so it does not have to depend solely on cash collateral during the entire month of June.
HDL is selling of a large batch of its lab equipment used for blood testing. Photo courtesy of Ettin Group.
At a separate hearing on Monday, the judge approved an additional motion that will allow HDL some extra cash flow.
HDL received permission to proceed with the auction of about 30 pieces of laboratory equipment, using the Illinois-based Ettin Group as auctioneer. The sale could open up some room in HDL’s headquarters at 737 N. Fifth St. for a potential new tenant.
The company had to work through some objections from BB&T regarding the auction, and the two sides ultimately agreed that the firm will hand over either $325,000 or 30 percent of the auction’s net proceeds to the bank.
The auction started May 21 and is set to end June 26. The final sales should close within about a week of the auction.
The remaining auction proceeds will be placed into an escrow account over which BB&T will have control, and HDL will provide confidential updates of the auction process on a weekly basis to the bank, sharing the final results within two days of the closing date.
Sbertoli declined to say what the expected proceeds from the auction might be.
Ettin Group is to receive up to $45,000 from HDL, along with a 15 percent buyer’s premium on each item sold.
At another hearing last week, Huennekens approved an agreement between HDL and the federal government over Medicare reimbursements, despite objections from BB&T’s counsel.
The agreement stipulates that the U.S. government is now a secured creditor of HDL, giving it the right to recoup overpayment fees that it had paid to the lab company before its bankruptcy filing. In exchange, the government agreed not to freeze HDL’s Medicare reimbursement payments, which account for 40 percent of the company’s total revenue, according to court records.
The government is one of HDL’s largest creditors due to a $47 million settlement reached earlier this year that resolved a federal investigation into whether the company’s past practice of paying doctors to use its tests violated kickback laws.