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August 29, 2018

Fleet Quoted in Wall Street Journal Article on Provant Health Bankruptcy

From Wall Street Journal: Bankrupt Provant Health to Sell Assets to Quest Diagnostics

On Monday (8/27/2018) Provant Health Solutions filed for bankruptcy due to operating losses and deal-related debt. The deal between Provant and Summit Health, a Quest Diagnostics subsidiary, is subject to court approval and expected to close in early October. James Fleet, Senior Managing Director and Shareholder at Phoenix Management Services was hired by Provant Health as the Chief Restructuring Officer. The full article is provided below.

Bankrupt Provant Health to Sell Assets to Quest Diagnostics

By Becky Yerak

Provant Health Solutions, weighed down by operating losses and deal-related debt, filed for bankruptcy in New York on Monday with plans to sell virtually all of its assets to a subsidiary of Quest Diagnostics Inc. for $27 million.

Provant, based in Olathe, Kan., provides services that include sample collection, health-risk screening and on-site flu shots administered by independent contractors. Its customers include corporations and clinical-research organizations. Provant said it has 326 employees on its payroll but through a network of health professionals did nearly 1 million screenings last year.

Provant and six related companies, including publicly traded Hooper Holmes Inc., entered bankruptcy with $24.4 million in debt, of which $17.6 million is a secured term loan owed to SWK Holdings Corp. of Dallas and $4.8 million is a secured revolving credit facility provided by CNH Finance L.P. of Greenwich, Conn. SWK specializes in providing financing to health-care companies, and the industry is also one of CNH’s main areas of focus.

In 2017, Hooper, founded in 1899, merged with Provant Health Solutions LLC. Hooper and its subsidiaries now do business as Provant Health.

The chief factor leading to the chapter 11 filing is the amount of debt on the balance sheet, partly taken on in recent mergers and acquisitions, James Fleet, who was named chief restructuring officer in March, said in papers filed in U.S. Bankruptcy Court in New York.

Those deals have included Accountable Health Solutions Inc., which it bought for about $7 million partly to expand its ability to provide health coaching over the telephone. That added about $2 million in debt to its balance sheet, Mr. Fleet said.

The problem of “unsustainable” debt has been compounded by operating losses and negative cash flows, he said. The company’s chief executive resigned earlier this year.

Hooper’s stock is now trading at about 2 cents a share. As recently as 2015 its shares were at $9.45.

Provant, which had a history of operating losses, and Hooper “expected that the merger would increase scale, improve gross margins due to combined revenues and operations” and offer chances to reduce costs, Mr. Fleet said.

But the combined business was saddled with additional costs and debts, and the potential for cost-cutting was “overestimated,” he said.

According to a court filing, Hooper executives and directors and their affiliates own more than half of the company’s shares, with an entity of Century Equity Partners owning nearly 47%. Hooper’s directors include Frank Bazos, a managing director of the Boston-based investment firm.

The cash deal between Provant and Summit Health Inc., a Quest subsidiary, is subject to court approval and better bids. Terms of the deal also include the assumption of certain liabilities and the willingness of Provant to provide interim services to Summit, a stipulation that Provant said will help preserve jobs at least through the end of the year.

Provant and Summit expect to close the deal in early October, a timeline that Mr. Fleet said is critical since October is typically a busy month for the company.

The bid also provides that the $27 million cash offer will go down by $150,000 for each day that the sale closing is delayed after Oct. 10.

If a better bid comes in during the court-supervised process, Summit could receive a breakup fee equaling 3.5% of its proposed purchase price and an expense reimbursement of up to $300,000.

Raymond James & Associates Inc. was Provant’s investment banker. It contacted 259 potential buyers and got four initial indications of interest.

To get through chapter 11 proceedings, Provant has lined up $13.6 million in financing from its existing lenders, with CNH providing $12 million and SWK $1.6 million.

A dozen other companies were approached about providing financing, but none submitted term sheets, Mr. Fleet said.

Provant is represented by the law firm Foley & Lardner LLP. Its turnaround firm is Phoenix Management Services LLC. The case, 18-23302, has been assigned to Judge Robert Drain.

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