Wellpath’s Recovery Services division is well on its way to independence from the rest of the prison-based and outsourced behavioral health care service provider’s operations.
However, these behavioral health assets aren’t going far as they change hands. Wellpath’s lender group will acquire the assets as part of a $395 million credit bid plus $14.25 million to help stand up the Recovery Services division as an independent enterprise, according to a recording of court proceedings on Jan. 8.
No qualifying bids for the Recovery Services division materialized after a marketing and bid process according to documents and recordings. The final sales documents were not publicly available at the time of this article’s publication.
“On the basis of the evidence (the uncontroverted is significant), negotiation and refinement of the sales process, I am going to go ahead and approve the sale,” Bankruptcy Judge Alfredo Perez said, according to the recording.
The deal effectively deletes $395 million of the debt that Wellpath owes to its creditors. Documents show that the company has a loan debt of $644 million due by October 2025. The original stalking horse bid was valued at $375 million.
The Recovery Solutions division encompasses 3,700 clinical staff caring for about 3,000 patients in 70 facilities across 10 states. It provides services in prisons, jails, state hospitals, forensic treatment and civil commitment centers. It also offers community-based services, including a handful of private, standalone facilities such as the NeuroBehavioral Hospitals in Florida and the Alpine Special Treatment Center and Harborview Center facilities in California.
This is the second time that the investment and operator markets took a pass on the Wellpath Recovery Services division. Before initiating bankruptcy proceedings in November, the company sought to sell the division to stave off looming debt maturities. The number of potential buyers who decided to sign confidentiality agreements to take a look at the company totaled 70, according to documents.
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