MedCath Sells Bakersfield Heart Hospital To Cardiovascular Care Group; Provides Guidance for Pending Dissolution Filing
CHARLOTTE, N.C., July 2, 2012 /PRNewswire/ -- MedCath Corporation (Nasdaq: MDTH) announced that it entered into a definitive equity purchase agreement and completed the sale of its 53.31% equity interest in Bakersfield Heart Hospital ("BHH") and its secured loans to BHH to Cardiovascular Care Group ("CCG"). The transaction was effective June 30, 2012. Navigant Capital Advisors provided advisory services to MedCath related to the transaction.
The purchase price for MedCath's equity interest and secured loans is approximately $38.1 million subject to post-closing working capital adjustments. MedCath anticipates it will receive approximately $34.0 million in cash from the transaction after payment of taxes and closing costs. By completing this transaction, MedCath has realized the value of BHH reflected in its March 31, 2012 Form 10- Q filed with the United States Securities and Exchange Commission (the "SEC") on May 10, 2012. The anticipated net cash proceeds do not include an estimate of BHH's liability, if any, retained by MedCath arising out of the Department of Justice's ("DOJ's") national investigation regarding implantable cardioverter defibrillators (the "ICD Investigation") . The purchase agreement obligates MedCath to indemnify CCG for 53.31% of BHH liabilities arising out of the ICD Investigation for the period prior to closing.
"We have now sold all 10 of our hospitals since announcing in March 2010 that we had formed a Strategic Options Committee to consider the sale either of the entire company or our assets," said Art Parker , MedCath's CEO. "We're proud of the focus we always maintained during this process on high-quality patient care, and we wish the new owners great success."
On August 17, 2011, MedCath filed a proxy statement with the SEC (the "Proxy") seeking stockholder approval of a plan of complete liquidation and dissolution of the Company (the "Plan of Dissolution"). The stockholders of MedCath approved the Plan of Dissolution on September 22, 2011.
MedCath's Board of Directors believes the conditions outlined in the Proxy to file a certificate of dissolution in accordance with Section 275 of the General Corporation Law of the State of Delaware ("DGCL") (the "Filing") by September 22, 2012 have been satisfied. As a result, the Company currently anticipates making the Filing on or about September 22, 2012 and making a liquidating distribution to its stockholders as part of the Plan of Dissolution prior to the Filing (the "Pre-Filing Distribution") currently estimated to be in the range of approximately $5.75 to $6.25 per share.
Based on prior history, the Company does expect that it will incur contingencies during its wind-down period that it cannot accurately estimate at this time. Therefore, the estimated Pre-Filing Distribution was derived using the Company's current estimate of a cash holdback of approximately $48.0 to $58.0 million (the "Holdback"). The Holdback will be used to satisfy all of the Company's estimated contingent liabilities, including without limitation (a) any liabilities arising out of the DOJ's ICD Investigation, the exact amount of which is currently unknown, (b) other currently unknown or unanticipated liabilities due to the government for unknown reimbursement claims, such as recovery audits ("RAC" audits), cost report settlements, and any other unknown contingent liability that may arise during the normal course of operations during the wind-down period, including legal claims and governmental investigations, as previously disclosed, and (c) a reserve of such additional amount as the Board of Directors determines to be necessary or appropriate under the DGCL with respect to additional liabilities that may arise or be identified after the Filing.
The Pre-Filing Distribution and the Holdback do not take into consideration any tax benefits that may be realized as part of the wind-down process, including the payment of contingent liabilities related to the Holdback. The Pre-Filing Distribution also does not take into consideration other assets that are expected to be converted into cash subsequent to the Filing.
MedCath's management and Board of Directors will continue to evaluate the adequacy of the Holdback and may make adjustments as necessary to the Holdback prior to the Pre-filing Distribution. The final amount of the Pre-Filing Distribution is subject to the approval by the Board of Directors and is subject to numerous risk factors listed in the Proxy and the Company's Form 10-K filed with the SEC on December 14, 2011. Future additional distributions during the three year wind-down period, if any, will be made after the Filing in accordance with the DGCL once provision has been made for all liabilities of the Company.
The Company will close its stock transfer books on the date on which the Filing is made and on that date the Company's common stock will cease to be quoted on a registered securities exchange and will otherwise cease to be traded. The Company intends to announce the date of the Filing on a Form 8-K filed with the Securities Exchange Commission at least 20 days prior to the date on which the Filing is made.
MedCath Corporation, headquartered in Charlotte, N.C. was a health care provider focused on high acuity services with the diagnosis and treatment of cardiovascular disease being a primary service offering. After the sale of BHH, MedCath will no longer operate hospitals, but will focus on fulfilling transition service obligations to the purchasers of certain of its hospitals; realizing the value of its remaining assets; making tax and regulatory filings; winding down its remaining business activities; managing its known and unknown contingencies; and making distributions to its stockholders as part of its Plan of Dissolution.
Cardiovascular Care Group (CCG) is a physician-driven company that partners with cardiovascular physicians to address the fundamental problems in the delivery of care for patients with cardiovascular disease. CCG, through its affiliates, first began partnering with cardiologists in the ownership of outpatient cardiac catheterization labs in 2000 and owns and operates Louisiana Heart Hospital in Lacombe, Louisiana. CCG is headquartered in Nashville, TN.
Safe Harbor Statement
Parts of this news release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Some or all of the forward-looking statements in this press release, which include the anticipated net proceeds of the sale and the estimated Pre-Filing Distribution may turn out to be wrong. Forward-looking statements can be affected by inaccurate assumptions MedCath might make or by known or unknown risks and uncertainties, including, but not limited to, the inherent uncertainty of the outcome of the ICD Investigation and other known and unknown contingent liabilities. Additional information concerning events and uncertainties that could cause the actual amount of the Pre-Filing Distribution to differ materially from the estimated range disclosed in this press release is contained in MedCath's reports to the Securities and Exchange Commission, including MedCath's reports on Form 10-K and 10-Q. However, MedCath undertakes no obligation to publicly update forward-looking statements, whether because of new information, future events or otherwise. Please refer to our Annual Report on Form 10-K, as amended, for the fiscal year ended September 30, 2011. Copies of our filings with the Securities and Exchange Commission, including exhibits, are available at http://www.sec.gov.
SOURCE MedCath Corporation
Browse our custom packages or build your own to meet your unique communications needs.
Learn about PR Newswire services
Request more information about PR Newswire products and services or call us at (888) 776-0942.