Wellpath Takes Action to Strengthen Financial Foundation and Position Business for Future, Ensuring Uninterrupted Service Delivery

Operations to continue uninterrupted, delivering high-quality patient care and exceptional client service

Secures up to $160 million in new financing to support ongoing business operations

NASHVILLE, Tenn.-Wellpath, the nation’s leader in providing compassionate medical healthcare to at-risk patients in correctional and mental health facilities, today announced it has reached a comprehensive agreement with approximately 85% of its first lien lenders and over 80% of its second lien lenders to strengthen the Company’s financial foundation and position Wellpath for long-term success. As part of the agreement, Wellpath intends to:

Sell its Recovery Solutions business to certain of its lenders (the “Ad Hoc Lender Group”) that will provide new money financing to Wellpath through a debtor in possession financing facility. Members of the Ad Hoc Lender Group will serve as the “stalking horse bidder” in a court-supervised auction and sale process.
Initiate a separate reorganization of Wellpath Correctional Healthcare, which includes its Local Government and State & Federal business divisions, which will entail a private placement equity investment by members of the Ad Hoc Lender Group. The reorganization will be subject to higher or otherwise better offers.

These transactions are expected to reduce the total debt of Wellpath’s Correctional Healthcare business by approximately $550 million. To implement the transactions, the Company has filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the Southern District of Texas. Concurrently, Wellpath filed a motion requesting approval of a marketing and sale process (the “Bid Procedures Motion”), in connection with which Wellpath and the Ad Hoc Lender Group have negotiated a “stalking horse” purchase agreement for the sale of Recovery Solutions. The Bid Procedures Motion also seeks to facilitate a competitive bidding process for Recovery Solutions under section 363 of the Bankruptcy Code designed to achieve the highest or otherwise best value for Wellpath and its stakeholders. In connection with the Chapter 11 filing, Wellpath has initiated a separate reorganization of Wellpath Correctional Healthcare, which will entail a private placement equity investment by members of the Ad Hoc Lender Group, which will be subject to higher or otherwise better offers.

Wellpath expects its operations to continue as usual throughout the court-supervised sale process, ensuring uninterrupted delivery of localized, high-quality, compassionate patient care. The Company has secured a commitment for approximately $522 million debtor in possession financing facility, with $105 million in immediate new money financing and up to $55 million in new money investment upon exit from the Chapter 11 cases, from members of the Ad Hoc Lender Group, subject to court approval, which will support Wellpath’s operations throughout the court-supervised process. The current executive team remains in place, and the process is not expected to impact Wellpath and Recovery Solutions employees.

“Wellpath has built and maintained an industry-leading position by providing best-in-class patient care and differentiated services to clients,” said Chief Executive Officer, Ben Slocum. “In the last several years, we have experienced a number of challenges initially brought on by the COVID-19 pandemic, including unexpected labor investments and costs for equipment, testing, and vaccines. Additional macroeconomic headwinds exacerbated these issues, including high inflation and rising interest rates. Despite the circumstances, we continued to put patient care first and made significant investments to ensure our patients received the highest level of care.”

He continued, “After evaluating our options, the Board and management team determined that a court-supervised process to facilitate a sale of our Recovery Solutions and a separate reorganization of Wellpath Correctional Healthcare is the best path forward to strengthen our financial foundation and stabilize Wellpath for the long-term. This action will enable us to continue providing for our patients, clients, providers, and team members as we deliver essential services to vulnerable populations. We are grateful to our clients and providers for their support and our team members for their commitment to improving our patients’ health and quality of life. We look forward to emerging from this process under new ownership and being better equipped for sustainable growth.”

The Company has filed customary motions with the court to authorize ongoing operations, including the timely, uninterrupted payment of employee wages, salaries, and benefits. Wellpath intends to pay vendors and suppliers in full under normal terms for goods and services provided during the Chapter 11 cases. The Company expects these motions to be approved in the coming days.

Court filings and other information regarding Wellpath’s court-supervised process is available at https://dm.epiq11.com/wellpath, or call (888) 884-6182 (for toll-free U.S. calls) or (503) 479-4073 (for tolled local calls).

McDermott Will & Emery is Wellpath’s legal counsel, Lazard and MTS Health Partners are its investment bankers, and FTI Consulting is its restructuring advisor.

ABOUT WELLPATH

Wellpath is the premier provider of localized, high-quality, compassionate care to vulnerable patients in challenging clinical environments. We hold patients at the center of everything we do and promote rigorous standards of care and innovation. With over 14,000 clinicians and professionals in 37 states across the U.S., Wellpath provides medical and mental healthcare services to more than 220,000 patients daily in more than 400+ facilities, including prisons, jails, state hospitals, forensic treatment, civil commitment centers, and community-based services. Our mission and values guide us in every decision, and we remain committed to our patients and work. Learn more at www.wellpathcare.com.