After its first attempt failed, Health Diagnostic Laboratory says it has lined up another deal for a pool of money aimed at keeping it afloat during its bankruptcy.
The downtown-based blood testing company on Thursday was granted the continued use of its cash collateral for at least another week as it attempts to finalize negotiations with a new lender for debtor-in-possession financing.
Since entering Chapter 11 bankruptcy protection in early June, HDL has depended on access to its cash, which is held as collateral by its largest creditor, BB&T. The company had been in discussions with New York-based Cerberus Business Finance for DIP financing in June, but the deal was eventually taken off the table.
Tyler Brown, a Hunton & Williams attorney representing HDL, told Judge Kevin Huennekens during a hearing Thursday that the company needs just a few more days to close the deal with the unnamed lender. The company has not said how much it will look to borrow from this new lender. It had sought to borrow up to $30 million from Cerberus.
“This one feels like it’s going to work out, judge,” Brown told Huennekens. “We’re not across the finish line yet, but we’re working hard to get there.”
Money has already been moved around to jump-start the potential new financing deal. The company said at Thursday’s hearing that it transferred $400,000 to BB&T to cover at least part of the deposit fee to the new lender. That money came from auctioning off excess lab equipment.
If the deal with the lender is sealed, HDL will ask permission from the court to take on the financing at a hearing on Tuesday.
Securing DIP financing will free HDL from its continued dependence on the money held by BB&T. While the bank has agreed to allow the company access to its cash thus far, it has expressed objections on a few occasions, mostly citing fears that HDL’s bankruptcy will fall into Chapter 7.
Brown said that DIP financing will allow HDL to continue operating as it pursues a sale of the entire company and to address additional expenses, including the ongoing rent payments on its headquarters complex downtown.
On Wednesday, HDL’s landlord asked the court to force the company to make good on two rent payments for its massive downtown headquarters at 737 N. Fifth St.
Court documents show that HDL has not paid rent since it filed for bankruptcy, and its landlord, Biotech 8 LLC, is owed $1.26 million for July and August rents.
HDL owns 58.9 percent of Biotech 8. Local real estate firm Lingerfelt Commonwealth Partners, which helped develop the 230,000-square-foot complex, owns the remaining portion. Fulton Bank is the lender on the property.
That issue is set to go before Huennekens on Aug. 20.
Also at Thursday’s hearing, two motions were approved to help HDL drum up additional cash. It received clearance from the court to forgo lease renewals on eight of its standalone blood draw locations, two of which are in the Richmond area in Reynolds Crossing and Mechanicsville.
It also received permission to sell all the assets of Central Medical Laboratories LLC, one of the three HDL entities that filed for bankruptcy in June.