Case Study: Vision Twenty-One, Inc.

Description:
Vision Twenty-One, Inc. was a publicly traded company that provided a broad range of management services to the eye care industry.  Prior to our engagement, the company had disposed of certain business lines to reduce its debt, but was neither able to stem its losses, service its debt nor relieve an acute liquidity problem.  Immediately prior to our arrival, the company announced that it was discontinuing its physician practice management business, the largest segment of the company.  At the time of our retention by the Board, management was in a state of upheaval, the company was virtually insolvent, facing numerous lawsuits and in danger of an imminent disorderly liquidation.

Process:
During the first week of the engagement, we convinced the senior secured lenders to provide immediate emergency funding to prevent a collapse of the business. Our analysis of the company’s major businesses lines indicated that the only viable component of the business was its managed care operation. Given the badly damaged state of the business, we developed and implemented a dual track strategy involving disposal of the physician practice and surgery center components of the business combined with the potential sale or reorganization of the Company’s managed care operation.  We ran the business as if it were in Chapter 11 by convincing all creditors that their recoveries would be maximized through an out of court process.

Results:
The managed care business was stabilized, and all other parts of the business were sold. The senior secured debt was restructured and all other creditors received a partial recovery of their claims. The emergency advances provided by the senior secured lenders at the outset of the project were repaid along with market rate interest. In a second restructuring, the senior secured lenders took ownership control over the managed care business through a foreclosure. In the years following the foreclosure, the business tripled in size, quadrupled its EBITDA and paid cash dividends to the lender-owners for five consecutive  years.  The company was then sold to a strategic buyer at a price that, in combination with the dividends, provided the lender-owners with a full recovery of principal plus a small yield on their pre-foreclosure debt.  Two of our principals served on the company board.