(Bloomberg) -- Better Health Group is seeking to bolster support for its debt restructuring plan after an unrelated court ruling favored minority lenders, fueling concern about scrutiny for such transactions, according to people familiar with the matter.
The Kinderhook Industries-backed primary care service provider wants to increase the backing for a deal it reached last month with an ad hoc group, which holds about 64% of existing first lien debt, to raise fresh financing and change the repayment structure.
The push for more support comes after a federal appeals court ruled Dec. 31 that Serta Simmons Bedding LLC shouldn’t have allowed some lenders to roll up their existing holdings into a higher priority loan, while pushing others like Apollo Global Management to the back of the queue.
While it’s unclear whether the Serta ruling will impact the deal, Better Health’s loan documents contain a similar provision regarding open market purchases and related Dutch auction offers, said the people, adding that the Serta decision could influence debt talks.
The ad hoc creditor group is working with Houlihan Lokey and Davis Polk & Wardwell, while some non ad hoc lenders retained Glenn Agre Bergman & Fuentes for assistance, the people said. The company is working with Evercore and Kirkland & Ellis.
Meanwhile, priority lenders who signed non-disclosure agreements to evaluate the proposed deal also agreed to a standstill, which makes it harder for lenders to organize and potentially litigate, they said. All secured lenders will be able to participate in the transaction, but at different mixes of higher and junior ranking paper, they said.
Messages left with Better Health Group, Kinderhook, Davis Polk, Evercore, Glenn Agre and Kirkland were not returned, while a representative with Houlihan declined to comment.
--With assistance from Eliza Ronalds-Hannon.
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