California Proton Treatment Center LLC, the developer of the Scripps Proton Therapy Center in San Diego, filed for Chapter 11 on Wednesday, March 1, and intends to sell the cancer treatment facility.
The Scripps facility is the third of its kind to enter Chapter 11 since 2015; all of them have received backing from Advanced Particle Therapy LLC (APT). The debtor is due in court before Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court for the District of Delaware in Wilmington on Friday on its request to access a $32 million debtor-in-possession loan.
Texas billionaire Kelcy Warren and a limited partnership affiliated with Dallas financial services firm Williams Financial Group combined to invest $18.8 million in the California project. Warren, the CEO of natural gas company Energy Transfer Partners, also invested $20 million into an unfinished APT proton treatment facility in Dallas that was going to be affiliated with the University of Texas. As the project died and Dallas Proton Treatment Center LLC liquidated in Chapter 11, Warren sued APT in Texas state court in September.
Warren alleges that APT fraudulently diverted funds from the Dallas project to complete proton treatment facilities in Baltimore and Atlanta. The Baltimore project is up and running as the Maryland Proton Treatment Center and is affiliated with the University of Maryland.
Creditors filed an involuntary Chapter 11 petition against the Georgia Proton Treatment Center in March but the case was dropped after they came to a confidential agreement with the alleged debtor to aid in the search for permanent financing to complete the partially-built facility, which is affiliated with Emory University. Nonprofit Provident Resources Group Inc. has since replaced APT as developer of the site and will issue $400 million in bonds to finance its construction.
APT now stands to also lose its stake in the Scripps facility, which opened in 2014.
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"[The facility] will continue to operate at the very highest quality with the current team of physicians, nurses, medical technicians, and clinical staff," California Proton Treatment Center chief restructuring officer Jette Campbell said in a statement. "Our doors will remain open to administer highly-specialized cancer therapies, and a patient ombudsman will ensure that our transition to a new organizational framework won't affect patients or staff."
"We were informed by the California Proton Treatment Center of the Chapter 11 bankruptcy just yesterday," a Scripps spokesperson told The Deal. "Representatives of [the facility] informed Scripps that it will be business as usual at the center."
A California Proton Treatment Center spokesperson did not immediately provide additional comment.
Campbell said in a declaration that the facility has never been profitable and that prepetition lenders JPMorgan Chase Bank NA, ORIX Capital Markets LLC and Varian Medical Systems International AG refused to provide any more credit outside of bankruptcy. All three are lenders on the $32 million DIP.
"Based on an assessment of the limited alternatives before it, the debtor has concluded that the best path forward for it and its creditors is a bankruptcy proceeding that incorporates a sale of substantially all of the debtor's assets," Campbell added.
JPMorgan, ORIX and Varian are owed a combined $180.74 million on three classes of notes. The DIP rolls up $16 million of that prepetition indebtedness and also offers $16 million in new money. It carries a $560,000 upfront fee and an interest rate of LIBOR plus 9% and will mature upon consummation of a sale.
In proton therapy, a beam that contains the positively charged particle is fired at cancerous tissue. Studies on the effectiveness of proton therapy relative to other forms of radiation treatment have been inconclusive.
The California Proton Treatment Center's largest unsecured creditors include MMBC Proton Inc. ($275,000), San Diego Gas & Electric ($194,600), SCG Capital Corp. ($95,000), GE Healthcare ($48,125) and Varian ($33,153). It listed assets and liabilities between $100 million and $500 million in its petition.
David W. Wirt, Aaron C. Smith, Phillip W. Nelson and Brian A. Raynor of Locke Lord LLP are debtor counsel, as are Christopher A. Ward and Justin K. Edelson of Polsinelli PC.