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Sun Capital-Backed Medical Centers File Chapter 11, Seeks Sale

An examination room is seen at the Oscar Center in the Brooklyn borough of New York, U.S., on Wednesday, Dec. 7, 2016. The Oscar Center runs in partnership with Mount Sinai Health Systems providing primary care services and health and wellness programs. (Kholood Eid/Bloomberg)

(Bloomberg) -- The operator of Clinical Care Medical Centers, a Florida-based health system owned by Sun Capital Partners, has filed for bankruptcy and intends to sell the business to an affiliate of Humana Inc.

MBMG Holding LLC filed Chapter 11 Sunday in Miami, attributing its financial troubles to Medicaid and Medicare-related changes that have cut into its revenue as well as rising costs following the Covid-19 pandemic which have stressed the health sector.

The company, which runs 26 primary care facilities in Florida that care for about 35,000 patients, said in court papers it has also struggled with the “substantial debt” incurred when Sun Capital acquired the business in December 2020. MBMG, which was re-branded as Clinical Care Medical Centers following the transaction, said it has about $480 million in long-term debt.

The acquisition was funded through a combination of Sun Capital’s own capital as well as senior debt recently acquired by KKR & Co. Inc. Capital One N.A. in August sold the senior debt to KKR, which had previously owned Clinical Care Medical Centers junior debt, according to court documents.

Sun Capital’s acquisition occurred at a time when valuations for the type of clinics operated by Clinical Care Medical Centers were at their peak, MBMG Chief Restructuring Officer Nicholas Campbell said in a sworn declaration filed in bankruptcy court. But in the years following Covid-19 era lockdowns, valuations have declined while medical expenses have spiked, Campbell said.

Clinical Care Medical Centers began marketing itself in 2023 and ultimately struck a deal to sell the business to Humana affiliate Conviva Care Centers for $45 million. The transaction is subject to bankruptcy court approval. The deal is also subject to state and federal regulatory approvals as well as certain other closing conditions, Humana said in an e-mailed statement Monday.

The transaction is expected to close in the next 60 days.

KKR has agreed to provide Clinical Care Medical Centers with $10 million in Chapter 11 financing in order to fund the bankruptcy. Before filing Chapter 11, company advisers asked KKR to provide a $40 million unsecured note because “the company lacked sufficient liquidity to operate the business during the sale process,” Campbell said.

The case is MBMG Holding LLC, number 24-20576, in the US Bankruptcy Court for the Southern District of Florida.

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