Downtown-based HDL also hopes to generate cash by renting out some of its downtown office space.
Health Diagnostic Laboratory has finally gained some financial freedom after months of “bad blood” between the company and its bank.
The downtown blood testing company, which filed for Chapter 11 bankruptcy in early June, finalized a $12 million debtor-in-possession financing deal over the weekend that a federal judge approved Tuesday following a lengthy, last-minute hearing.
The lender for the DIP financing is an affiliate of Greenwich, Connecticut-based Credit Value Partners. The first $6 million of the loan will be available on an interim basis until a final court order is entered approving the deal after a hearing on Aug. 24.
The money will provide the once fast-growing firm with enough funds to continue operating day to day until it can complete a sale of the company in an auction that’s expected to wrap up by the end of September.
With DIP financing in hand, HDL will no longer operate under the thumb of BB&T. The bank is HDL’s largest creditor and had a hand in pushing HDL toward bankruptcy after cutting the company off from its line of credit. HDL had since relied on access to its cash collateral, controlled by BB&T, in order to continue operating through the bankruptcy process.
The loan deal with Credit Value also diminishes BB&T’s standing in the priority ranking of HDL’s creditors.
In a statement this week, HDL’s corporate council Doug Sbertoli said that BB&T had the opportunity to provide HDL with DIP financing on multiple occasions.
“Such an action would have left the bank’s position as the senior secured lender unchallenged,” Sbertoli’s statement reads. “However, BB&T declined on each occasion to provide such funding. Decisions have consequences.”
Credit Value will now have a priority collateral position, while the bank is left with a subordinate lien position in respect to HDL’s assets, Sbertoli’s statement continues.
BB&T frequently objected to HDL’s cash collateral motions throughout its bankruptcy process, at one point citing HDL’s “imminent” conversion to Chapter 7. The bank did not let the financing motion go through without a fight on Tuesday, either.
Jonathan Hauser, a Troutman Sanders attorney representing BB&T, told Judge Kevin Huennekens that the bank did not have enough time to fully read and analyze the 200-page DIP financing motion before the scheduled hearing, as it was only filed late Sunday night.
“My client’s rights have been trampled,” Hauser told Huennekens. “We did not agree to this … we had no idea this was coming.”
In response, Richard Kanowitz of the law firm Cooley, representing the committee of unsecured creditors, called Hauser’s claims “ridiculous.”
“The bad blood between BB&T and the former management (of HDL) should not tank this case,” Kanowitz said in court Tuesday.
He argued that it was BB&T’s efforts to freeze HDL’s bank accounts in late May that forced the company into bankruptcy in the first place, saying the bank has done “nothing positive in this case.”
“The bank had it in their control to loosen the reins with cash collateral,” Kanowitz said. “They refused to.”
Huennekens agreed with Kanowitz, allowing the hearing to continue, saying, “I’m just not going to hear this,” and calling the bank “disingenuous.”
Credit Value’s loan is $8 million short of a previous DIP financing deal HDL had in the works with New York-based Cerberus Business Finance; that deal fell through in June.
Credit Value has no previous affiliation with HDL, said Tyler Brown of Hunton & Williams, an attorney representing HDL, nor does it have an interest in buying the company. Some potential bidders for the company had expressed interest in providing funds to HDL on a loan-to-own basis.
At a creditors meeting Wednesday, Assistant U.S. Trustee Robert Van Arsdale received answers regarding the distribution of “huge amounts of money” he had questioned at a similar meeting in early July.
HDL’s chief restructuring officer at the time, Martin McGahan, referred to those payments as shareholder distributions.
HDL’s representatives told Van Arsdale Wednesday that a total of $97 million went out to shareholders in 2012, in the form of bonuses, annual salaries and income tax, among other discretionary distributions. That number dropped to $51 million in 2013, $18 million in 2014, and so far in 2015 it comes in at just over $3 million.
No individual shareholders were named in relation to those payments.
Known HDL shareholders include founder and former CEO Tonya Mallory, as well as Robert Bradford Johnson and Floyd Calhoun Dent, the founders of HDL’s former sales contractor, BlueWave Healthcare Consultants.
Downtown-based HDL also hopes to generate cash by renting out some of its downtown office space.
Health Diagnostic Laboratory has finally gained some financial freedom after months of “bad blood” between the company and its bank.
The downtown blood testing company, which filed for Chapter 11 bankruptcy in early June, finalized a $12 million debtor-in-possession financing deal over the weekend that a federal judge approved Tuesday following a lengthy, last-minute hearing.
The lender for the DIP financing is an affiliate of Greenwich, Connecticut-based Credit Value Partners. The first $6 million of the loan will be available on an interim basis until a final court order is entered approving the deal after a hearing on Aug. 24.
The money will provide the once fast-growing firm with enough funds to continue operating day to day until it can complete a sale of the company in an auction that’s expected to wrap up by the end of September.
With DIP financing in hand, HDL will no longer operate under the thumb of BB&T. The bank is HDL’s largest creditor and had a hand in pushing HDL toward bankruptcy after cutting the company off from its line of credit. HDL had since relied on access to its cash collateral, controlled by BB&T, in order to continue operating through the bankruptcy process.
The loan deal with Credit Value also diminishes BB&T’s standing in the priority ranking of HDL’s creditors.
In a statement this week, HDL’s corporate council Doug Sbertoli said that BB&T had the opportunity to provide HDL with DIP financing on multiple occasions.
“Such an action would have left the bank’s position as the senior secured lender unchallenged,” Sbertoli’s statement reads. “However, BB&T declined on each occasion to provide such funding. Decisions have consequences.”
Credit Value will now have a priority collateral position, while the bank is left with a subordinate lien position in respect to HDL’s assets, Sbertoli’s statement continues.
BB&T frequently objected to HDL’s cash collateral motions throughout its bankruptcy process, at one point citing HDL’s “imminent” conversion to Chapter 7. The bank did not let the financing motion go through without a fight on Tuesday, either.
Jonathan Hauser, a Troutman Sanders attorney representing BB&T, told Judge Kevin Huennekens that the bank did not have enough time to fully read and analyze the 200-page DIP financing motion before the scheduled hearing, as it was only filed late Sunday night.
“My client’s rights have been trampled,” Hauser told Huennekens. “We did not agree to this … we had no idea this was coming.”
In response, Richard Kanowitz of the law firm Cooley, representing the committee of unsecured creditors, called Hauser’s claims “ridiculous.”
“The bad blood between BB&T and the former management (of HDL) should not tank this case,” Kanowitz said in court Tuesday.
He argued that it was BB&T’s efforts to freeze HDL’s bank accounts in late May that forced the company into bankruptcy in the first place, saying the bank has done “nothing positive in this case.”
“The bank had it in their control to loosen the reins with cash collateral,” Kanowitz said. “They refused to.”
Huennekens agreed with Kanowitz, allowing the hearing to continue, saying, “I’m just not going to hear this,” and calling the bank “disingenuous.”
Credit Value’s loan is $8 million short of a previous DIP financing deal HDL had in the works with New York-based Cerberus Business Finance; that deal fell through in June.
Credit Value has no previous affiliation with HDL, said Tyler Brown of Hunton & Williams, an attorney representing HDL, nor does it have an interest in buying the company. Some potential bidders for the company had expressed interest in providing funds to HDL on a loan-to-own basis.
At a creditors meeting Wednesday, Assistant U.S. Trustee Robert Van Arsdale received answers regarding the distribution of “huge amounts of money” he had questioned at a similar meeting in early July.
HDL’s chief restructuring officer at the time, Martin McGahan, referred to those payments as shareholder distributions.
HDL’s representatives told Van Arsdale Wednesday that a total of $97 million went out to shareholders in 2012, in the form of bonuses, annual salaries and income tax, among other discretionary distributions. That number dropped to $51 million in 2013, $18 million in 2014, and so far in 2015 it comes in at just over $3 million.
No individual shareholders were named in relation to those payments.
Known HDL shareholders include founder and former CEO Tonya Mallory, as well as Robert Bradford Johnson and Floyd Calhoun Dent, the founders of HDL’s former sales contractor, BlueWave Healthcare Consultants.