AHP hangs on

BRENTWOOD, Tenn. - American HomePatient (AHP) and its creditors still can't figure out what to do about the provider's $226 million in outstanding debt, industry watchers say.

AHP announced last week that it had entered into another forbearance agreement with NexBank and other creditors, the fifth such agreement since Aug. 1, 2009, the date the debt was originally due.

"It's a little unusual, but obviously, they're not ready to restructure the debt, and they're not ready to file bankruptcy," said Rick Glass, president of Steven Richards & Associates, a Tarpon Springs, Fla.-based mergers and acquisition (M&A) firm.

As part of this latest agreement, creditors have agreed "not to exercise their rights or remedies for the company's failure to repay the debt" before Dec. 16, 2009.

The creditors have little choice but to keep cutting AHP some slack, industry watchers say.

"They either give them more time and hope things get better, so they can get some of their money out; or they flip them into bankruptcy and end up with a bunch of equipment and operations that they don't know how to run," said Bob Leonard, a broker with The Braff Group, a Pittsburgh-based M&A firm. "They're painted into a corner."

With bankruptcy not an option, or at least not an attractive one, industry watchers suspect AHP and its creditors are haggling over how to restructure the debt. Possible considerations: Discounting the debt or spreading payments over a longer period of time.

It's no surprise that AHP and its creditors still haven't come to a resolution, industry watchers say.

"They're too leveraged and with the continuous cuts in the HME industry, the numbers just aren't there," said Bruce Burns, president of Affinity Ventures, an Albuquerque, N.M.-based M&A firm.

But don't write AHP off, industry watchers say.

"Like Rotech, which recently bought a few pieces of Air Products Healthcare, they may be saying, 'We're getting our act together. We have some debt issues, but the business is doing OK,'" Leonard said. "I don't think they're going away."