MultiPlan's Debt Saga: Part 2 - The Exchange Offers and the Price-Fixing Cloud

You can find the court motion for this post here, in Google Drive.

MultiPlan is undergoing a significant financial maneuver called a restructuring or refinancing. This process aims to reorganize the company's debt obligations to improve its financial health and stability. Essentially, MultiPlan is trying to change the terms of its existing loans and bonds to make them more manageable. Here's a breakdown:

Why is MultiPlan Restructuring?

The company has faced some challenges, including legal issues and weaker-than-expected performance. These challenges likely put pressure on their ability to meet their existing debt payments. By restructuring, MultiPlan is attempting to:

• Extend Debt Maturities: Push back the deadlines for when they have to repay their debts, giving them more time to improve their financial situation.

• Reduce Debt Burden: Potentially lower the overall amount they owe or make the repayment terms more favorable.

• Improve Cash Flow: Free up more cash in the short term to invest in their business and hopefully become more profitable.

What's Involved in the Restructuring?

MultiPlan is using a combination of strategies to achieve its refinancing goals:

• Exchange Offers: MultiPlan is offering its current creditors (those who hold its bonds and loans) the opportunity to swap their existing debt for new debt with revised terms (like longer maturities or different interest rates). This is a common tactic in restructurings.

• Consent Solicitations: MultiPlan is also asking its creditors to agree to changes in the legal agreements (like loan contracts or bond indentures) that govern their debt. These changes could relax certain restrictions or make it easier for MultiPlan to operate with more flexibility.

Key Players and Documents:

• Transaction Support Agreement (TSA): This crucial document outlines the terms and conditions of the refinancing and has been agreed to by MultiPlan and certain groups of its creditors who hold a significant portion of its debt.

• Offering Memorandum: A detailed document that explains the exchange offers to the creditors. It's like a prospectus that provides information about the new debt being offered in exchange for the old debt.

• Notice and Instruction Form: This document is specifically for holders of existing Term Loans, guiding them on how to participate in the exchange offers and consent solicitations.

• New 1L Credit Agreement, New 2O 1L Notes Indenture, etc.: These are the new legal agreements that will govern the new debt instruments (loans and bonds) being issued as part of the restructuring. They define the terms, conditions, and rights of both MultiPlan and its creditors under the new debt structure.

• Intercreditor Agreement: An agreement among different groups of creditors that establishes how they will rank in terms of priority of payment and security interests if MultiPlan faces financial difficulties in the future. This agreement helps ensure that all creditors understand their rights and obligations.

Important Note:

Liability management exercises like debt restructurings can be complex, and the sources provided only offer a partial view. For a comprehensive understanding of MultiPlan's refinancing, it's important to consult additional sources like financial news articles, regulatory filings (e.g., SEC filings), and legal documents.

Yes, the ongoing lawsuits and allegations of price fixing against MultiPlan are a significant point of attention among creditors involved in the exchange offers. Several sources highlight this concern:

• MultiPlan Engages Guggenheim: This source mentions that "some debtholders remain concerned about the company’s credit health against the backdrop of litigation against the company on alleged pricing and antitrust matters." This concern arose before the announcement of the exchange offers, indicating that the litigation was already a factor influencing creditors' perceptions of MultiPlan's financial stability.

• MultiPlan Confirms Debt Discussions: Exploration of Options Relating to Capital Structure: This source confirms that MultiPlan engaged Guggenheim Securities to explore balance sheet options "amid its mounting legal battles." This reinforces the notion that the litigation is a driving force behind the company's need to restructure its debt.

• MultiPlan's Proposed Pro Rata Uptier Exchange Would Extend First Funded Debt Maturity to 2030 at 100% Participation; TSA Parties Hold Requisite Majority of Each Debt Security; TLB Participation Beyond TSA's 60% Might Face Certain Resistance: This source notes that "prices of MultiPlan’s debt have rallied" after the announcement of the exchange offers. This suggests that creditors view the restructuring as a positive step towards mitigating the risks associated with the litigation, but some uncertainty remains as the lowest participation level among the TSA participants is from the holders of the term loan B.

• Multiple AMA State of Illinois Cartel Complain: This source details allegations against MultiPlan of leading a price-fixing cartel, highlighting the seriousness of the claims and the potential financial and reputational damage to the company. These allegations underscore the substantial risks creditors are considering when evaluating the exchange offers.

• MultiPlan Verity Health System of California Inc. Community Health Systems: This source summarizes various price-fixing lawsuits against MultiPlan, emphasizing that the company "faces numerous lawsuits containing similar allegations from healthcare providers across the country." This widespread litigation further amplifies creditor concerns about MultiPlan's long-term viability and the potential impact on their investments.

In summary, the sources consistently depict a scenario where the current lawsuits and price-fixing allegations are key considerations for creditors participating in MultiPlan's exchange offers. While the restructuring aims to address some of these concerns by extending maturities and improving the company's financial position, the ongoing litigation continues to pose a significant risk that creditors are closely monitoring.

The Transaction Support Agreement (TSA) is a legally binding agreement between MultiPlan and certain groups of its creditors who hold a significant portion of its debt. These creditors are often referred to as "Consenting Stakeholders." They have agreed to support the terms of the restructuring as outlined in the TSA. The TSA is a crucial step in a debt restructuring as it demonstrates to the broader creditor base that there is substantial support for the proposed plan.

Think of it like a "pre-agreement" where the major players have already shaken hands on the main points. This makes it more likely that the overall restructuring will be successful.

Key Elements of the TSA:

• Support for Transactions: Consenting Stakeholders commit to supporting and cooperating with MultiPlan to implement the debt restructuring transactions, including the exchange offers and consent solicitations. This includes voting in favor of any necessary approvals.

• Standstill and Negative Covenants: Consenting Stakeholders agree not to take any actions that would hinder the restructuring, such as objecting to the transactions, soliciting alternative proposals, or initiating legal proceedings that would interfere with the process.

• Information Sharing and Due Diligence: MultiPlan commits to providing Consenting Stakeholders with reasonable access to information about the company's finances and operations, as well as updates on the progress of the restructuring. This allows creditors to make informed decisions about their participation in the exchange offers.

• Conditions Precedent: The TSA will outline certain conditions that must be met for the restructuring to be completed. These could include things like obtaining regulatory approvals, reaching specific participation thresholds in the exchange offers, or resolving any pending litigation.

• Termination Rights: The agreement also typically includes provisions for when and how the TSA can be terminated, for example, if certain conditions are not met or if a better offer emerges.

• Confidentiality: The parties to the TSA agree to keep the terms and conditions of the agreement confidential.

• Governing Law: The TSA will specify which jurisdiction's laws will govern the agreement.

How does the TSA impact other creditors?

• "Go-Along" Rights: While other creditors who did not initially sign the TSA might still have the option to participate in the exchange offers, the terms of the TSA might create certain "go-along" rights. This means that if a sufficient majority of creditors (including those in the TSA) approve the restructuring plan, the remaining creditors might be bound by the terms, even if they vote against it.

• Limited Negotiating Power: Creditors who are not part of the TSA typically have less negotiating power. The Consenting Stakeholders, by virtue of their agreement and the size of their holdings, have already influenced the terms of the restructuring.

In the specific case of MultiPlan, the TSA was crucial in getting the debt restructuring off the ground. The ad hoc noteholder groups that signed the TSA hold a substantial majority of each of MultiPlan’s outstanding debt instruments, giving them significant leverage in the negotiations. This is evident in that the exchange offer's terms closely mirror what the TSA parties agreed to.

You are right that debt agreements are legally binding contracts. However, most debt agreements, such as bond indentures and credit agreements, contain provisions that allow for modifications with the consent of a specified majority of creditors. This is where "go-along" rights, also known as "collective action clauses", come into play.

These clauses are designed to streamline the restructuring process and prevent a small minority of creditors from holding up a deal that is beneficial to the majority. Here's how they typically work:

• Threshold for Approval: The debt agreement will specify a percentage of creditors (e.g., holders of 66.67% or 75% of the outstanding principal amount) that must approve the proposed amendments.

• Binding Effect: If the required threshold is reached, the amendments become binding on all creditors, including those who voted against the changes or did not participate in the vote.

How is this legally possible?

• Contractual Agreement: When creditors initially purchase debt securities, they agree to the terms outlined in the governing documents, including these collective action clauses. By purchasing the debt, creditors consent to be bound by the decisions of the majority, even if they disagree with a specific decision.

Why are these clauses used?

• Prevent Holdouts: They prevent individual creditors from trying to extract better terms for themselves by refusing to agree to a restructuring that is supported by the majority.

• Expedite Restructuring: Collective action clauses make the restructuring process more efficient, allowing companies to quickly implement changes that are necessary to improve their financial situation.

In the case of MultiPlan, the TSA and the exchange offer materials likely contain provisions that establish the required thresholds for creditor approval. If these thresholds are met, the terms of the restructuring, including the new debt instruments and the amendments to the existing debt agreements, will become binding on all creditors.

The low participation level of the TSA parties in the term loan B might make it more challenging for MultiPlan to achieve the required threshold for certain amendments to the credit agreement. However, if a sufficient majority of the other creditors who did not participate in the TSA vote in favor of the proposal, they can still collectively approve the restructuring and bind the remaining term loan B holders.

It's important to note that the specifics of how "go-along" rights function can vary depending on the jurisdiction and the specific terms of the debt agreements.

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