Trio Healthcare Investors, LLC – AGG Moves Quickly to Help Executives Start Company in Multifaceted Deal

Challenge

A nationwide owner and operator of skilled nursing facilities, assisted living facilities and ancillary businesses spun off the operations of its skilled nursing facilities and assisted living facilities Three executives who had previously worked with Arnall Golden Gregory’s Regulatory Healthcare Transactions (RHT) Team sought to start their own business by acquiring the operations of a dozen of the facilities in Virginia. For tax and business reasons, the seller was on an accelerated schedule, so the three executives had to move quickly to form the new business. Arnall Golden Gregory was hired to form and structure the new business, advise on healthcare regulatory issues (including certificate of public need, licensure, Medicare and Medicaid), obtain all necessary regulatory and business authorizations in order to proceed with the closing, establish the credit facility to fund the acquisition and working capital, negotiate the transfer of the operations and the lease of the real estate, and address environmental and employment-related issues. Due to the deal structure and the deadline, all work had to be completed on the same day in December 2016.

Approach

AGG’s Corporate Team created a multi-tiered corporate structure for the facilities and their operations. For business reasons, real estate leases and operations were divided into approximately two dozen affiliated entities. AGG also helped the client negotiate leases of the 12 properties and put into place a mechanism for making equity grants to employees in the future. AGG’s RHT Team counseled the three executives in their initial pitch to the exiting operator and advised on how to close the transaction as quickly as possible while ensuring that reimbursement continued seamlessly. The RHT Team addressed structure and reimbursement issues, drafted all change of ownership (CHOW) applications, obtained new licenses, drafted all certificate of public need notices, and prepared and filed all Medicare and Medicaid filings, and handled all related and complicated regulatory issues. The RHT Team also negotiated closing on an expedited basis with the various stakeholders. The application process involved regular correspondence with multiple licensure agencies, as both nursing facilities and assisted living facilities were acquired. The RHT Team also conducted due diligence, advised on potential repercussions of survey deficiencies, and assisted in preparing and negotiating deal documents, including the credit agreement. The Commercial Lending Team took the lead in structuring, negotiating and closing senior and mezzanine asset-based loan facilities, the proceeds of which funded most of the acquisition and provide working capital. The Healthcare Real Estate Team negotiated the master lease agreement and related documents and assisted with due diligence relating to the assets acquired. The Environmental Team evaluated environmental liability insurance options and advised on environmental due diligence, environmental indemnity issues, environmental provisions in the master lease, and environmental representations and warranties in the financing agreement.

Result

Trio Healthcare was operational in just two-and-a-half months. The company’s 12 facilities in Virginia provide skilled nursing and assisted living services.