Article/Intelligence
Better Health Could Burn Through Pro Forma Liquidity in 2-3 Years Based on Company Projections, Springing Lien; Revised Deal Remains Among Most Aggressive in Terms of Value Transfer
Credit Research: Mark Fischer Key Takeaways Better Health’s update to its proposed multitier uptier transaction changes treatment slightly for participating non-ad-hoc group lenders from the transaction proposed in December 2024. Additional lenders agreed to second-tier treatment, bringing total support for the transaction to 86% of lenders. The deal, even as revised, represents a return to more aggressive liability management exercise tactics in terms of potential value transfer to the Davis Polk/Houlihan-led ad hoc group. Octus, formerly Reorg, calculates that the proposed transaction would result in 60% of value moving away from lenders outside the Davis Polk/Houlihan group, thereby improving the ad hoc group’s value by 34%. Based on Better Health projections, we expect that the company could run through its liquidity, pro forma for the transaction, of $225 million by 2027. However, if the springing lien in its revolver is not amended, actual liquidity could be significantly lower, running out in 2026 instead. The company anticipates maintaining positive liquidity through 2028 following the injection of new money under the transaction, according to sources. Terms of the Transaction According to sources and as previously reported, Better Health revised terms slightly for its uptier exchange transaction, which includes existing first[...]