Medical Staffing Network Holdings is preparing for a Chapter 11 filing
Medical Staffing Network Holdings is preparing for a Chapter 11 filing that would turn over the company to creditors and wipe out its shareholders.
The Boca Raton-based nurse staffing company (Pink Sheets: MSNW) has been battered by declining revenue as hospitals cut back on temporary staffing in favor of less expensive labor.
Its revenue fell to $340.9 million in 2009 from $537.8 million the year before, and its constant losses have ground away at its cash reserves.
Its Boca Raton-based rival, Cross Country Healthcare (NASDAQ: CCRN), also had a decline in revenue, but turned a profit in 2009 after cutting expenses and it recently worked out a deal to reduce its line of credit.
While Medical Staffing would continue under the restructuring agreement the company reached with its creditors, its Securities and Exchange Commission filing on Tuesday did not say what types of changes would take place.
Medical Staffing President Kevin Little did not immediately return a call seeking comment.
The restructuring agreement says Medical Staffing would file Chapter 11 in U.S. Bankruptcy Court by June 28. It would then enter into an asset purchase agreement with its first lien credit holders, led by General Electric Capital Corp. (GECC), to buy Medical Staffings assets in a stalking-horse bid.
Unless an outsider bidder submits a better offer, GECCs lending group would trade its $95.1 million credit to the company for its assets. It also would provide Medical Staffing with $15 million as debtor-in-possession financing to cover its cash needs as it attempts to stem the red ink.
The second lien holders, who are owed $25.2 million, agreed not to object to the sale.
It could take about 55 days during the bankruptcy process for the judge to approve the sale, the SEC filing stated. Medical Staffing said it plans to have its stock deregistered within 90 days.
Following the sale of the companys assets to the first lien lenders pursuant to the asset purchase agreement and the completion of the companys Chapter 11 proceeding, it is not anticipated that any value will be available for distribution to the holders of the companys common stock, Medical Staffing stated in its SEC filing.
Medical Staffing shares trading at under a penny on Tuesday afternoon, after reaching a 52-week low of 3 cents earlier on Monday. The 52-week high was 72 cents on Nov. 16. Its market capitalization was only $1.12 million.
Medical Staffing officers and directors, including Little and Chairman and CEO Robert J. Adamson, own 74 percent of its stock.
In addition to GECC, the first lien holders set to acquire Medical Staffing include SunTrust Bank, Bank of America, Hewlett-Packard Financial Services Co. and a host of investment funds organized by Dallas-based Highland Capital Management.
Miami-based law firm Berger Singerman is representing Medical Staffing in bankruptcy court.