Liberty positions itself for sale

Friday, October 31, 2014

PORT ST. LUCIE, Fla. – A bankruptcy judge has approved a stalking horse bid for the assets of Liberty Medical.

Liberty, which filed for Chapter 11 bankruptcy protection in February 2013, has proposed a sale of the majority of its assets in a stalking horse auction with a minimum bid of $46.5 million—$13 million in cash and $33.5 million in assumed liabilities—according to court documents. If there are competing bids, an auction would take place Nov. 7.

“This is an ideal situation for a debtor,” said bankruptcy attorney Joe Marshall, a partner in the Restructuring Group at Munsch Hardt in Dallas. “They have a locked-in sale and can shop it and see if they get higher bids. If nobody else shows up, you’ve got a sale in hand.”

If there are no other bidders, the judge will likely approve the sale in a hearing on Nov. 13. Any sale would not include its mail-order pharmacy business, LMSP Pharmacy, which it intends to sell separately. 

In its court motion, Liberty states that it hired Raymond James & Associates in March to evaluate whether there was potential for a sale and received interest from 11 parties, according to court documents.

“I don’t know if there’s a strategic buyer or a private equity firm looking to come in and scoop up a bargain,” said Jonathan Sadock, managing partner/CEO of Paragon Ventures. “Liberty has a huge accounts receivable and there are financers out there that see that as a great opportunity.”

In its bankruptcy filing, Liberty listed assets and liabilities between $100 million and $500 million, two months after a group of company execs bought it from parent company Medco Health Solutions. Liberty is a mail-order supplier of diabetes supplies and products, as well as sleep apnea, ostomy and urological supplies. In December 2012, it announced plans to sell its Medicare diabetes supply business to Arriva Medical after it did not win a competitive bidding contract.

“Competitive bidding was so decimating to so many people and it has eroded margins dramatically,” said Sadock. “It has caused good businesses, Liberty being one, to go upside down.” 

Liberty settles with CMS

Last week, Liberty Medical Supply has agreed to settle a $160 million claim with Medicare, according to new reports. The agreement, reached Friday, means Liberty will pay CMS nearly $32 million, according to an article on Law360.