Bankrupt bond-financed Georgia proton center nears final payout

With the bankruptcy of a Georgia bond-financed proton center winding down, bondholders are set to receive their final payouts, which will feature substantial haircuts.

The distribution follows the June sale of the struggling proton center to Emory University for about $110 million. After various closing costs, net sale proceeds totaled $101.9 million.

Bond debt totaled $368 million. With unpaid interest, the debt rises to $550 million.

The center was owned by Provident Resources Group and managed by the Georgia ProtonCare Center, Inc. The bonds were floated in 2017 and the center opened in 2018.

Emory's stalking horse bid carried the support of the majority of senior bondholders as represented by bond trustee UMB Bank NA.

The senior bond debt includes $243 million in outstanding principal and $68 million of accrued and unpaid interest. The subordinate debt includes $207 million in outstanding principal and $32 million of accrued and unpaid interest.

The court approved final distribution to creditors on Aug. 6.

Bond trustee UMB Bank N.A. is set to make an interim distribution of $105.6 million to senior bondholders on Sept. 4, according to an Aug. 10 notice on the Electronic Municipal Market Access website. Additional assets may become available in the future, the notice said.

Assuming only the senior bonds get repaid, as outlined by the bond indenture, it would mean a roughly 66% haircut for senior holders, and nothing for subordinate holders. Provident is among the subordinate bondholders.

The Chapter 11, filed Jan. 22 in the U.S. Bankruptcy Court for the Northern District of Georgia, comes after years of struggle and defaulted bond payments from Georgia's only proton therapy cancer treatment center.

Provident purchased the center in 2016 after an initial group of investors ran out of money and halted construction. The Atlanta Development Authority floated the unrated debt in 2017, and the center's doors opened in 2018.

The debtors blamed insufficient patient revenue for the financial troubles. Primary revenue sources of Medicare, Medicaid, commercial insurance and private pay "do not provide the debtor with sufficient income to service the debtor's significant debt obligations," chief restructuring officer Darryl Myers said in the first-day declaration.

Bondholders have a security interest in all of the center's assets and cash. Emory acquired the building, parking lot, land and a 90-ton cyclotron that generates proton particles for precision cancer treatment, along with five treatment rooms and additional imaging equipment, the university said.

The senior bonds last traded in March when an odd lot due in 2035 with a 6.75% coupon sold for 30.66. Roughly $6 million of the senior bonds sold for 30 on Jan. 29, days following the bankruptcy.

A $487,000 chunk of the subordinate capital appreciation bonds due in 2044 sold for 10 basis points on July 23.

The only proton center in Georgia is one of several municipal bond-financed proton centers facing distress across the country. Several of the facilities are owned by the Public Finance Authority.