Monday, May 14, 2007


Aug. 13 -- U.S. Bankruptcy Court Judge Jennie D. Latta approved temporary financing Thursday for 103 health care companies linked to Memphis-based Medshares Inc., while allowing them to spend $100,000 to court a new lender.

Medshares and Soleus Healthcare Services were among the related health care operations that filed for financial reorganization July 29. At that time, those companies had been factoring their accounts receivables through National Century Financial Enterprises Inc. (NCFE) of Dublin, Ohio, to improve cash flow and keep the business going. But company officials then said they reached that lender's limit.

In an effort to show Latta that $100,000 was a reasonable amount for a lender to ask for before looking into the financial condition of a bankrupt company, John R. Dunlap, one of Medshares' lawyers, put their financial expert Henry 'Dan' Andrews, back on the witness stand.
On Wednesday Dunlap had mentioned that TBN of TN chairman and chief executive Stephen H. Winters could be a potential witness. But Thursday Dunlap told Latta that Winters had to be in Atlanta for a meeting.
Andrews tried to further explain the cost structure for lenders who provide multimillion-dollar loans to troubled companies. He indicated that his financial analysis showed GECC's loan proposal would be less expensive than NCFE's lending program.
Quicker payment by the government and the insurance companies covering the patients Medshares and the others served would reduce financing costs. But the longer it took for a lender using accounts receivable to get their money, the more costly this method of financing would be, Andrews concluded. It now takes about 72 days to receive those payments, he said.
Higher loan origination fees have become more common, Craig Gardella testified. The corporate treasurer for TBN of TN said that his 19-years experience in commercial lending, including bank positions with First American, First Commercial and Regions, had shown that the $100,000 GECC required was "appropriate."
Dunlap explained that the money was just for a "preliminary investigation" by GECC for credit worthiness and would only allow them to proceed with a preliminary review.
Timothy J. Kincaid representing NCFE, told Latta that according to GECC's proposal, pledging the stock in the debtor (as collateral) was required.
"The stock of the debtor is already pledged," said Kincaid without elaborating.
Robert A. Udelsohn, the Memphis attorney representing Blue Cross Blue Shield of Tennessee, urged Latta to approve the fee saying that his client was "very interested in the continued operation of the debtor."
Latta approved the payment noting that the debtor considered NCFE's program "unduly expensive," and the $100,000 fee is "reasonable."

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