Document Page 1 of 25 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION In re SOUTHERN REGIONAL HEALTH SYSTEM, INC. d/b/a SOUTHERN REGIONAL MEDICAL CENTER, et al., Debtors. Chapter 11 Jointly Administered Under Case No. 15-64266-wlh NOTICE OF FILING OF APPLICATION FOR AN ORDER AUTHORIZING THE RETENTION AND EMPLOYMENT OF PRICEWATERHOUSECOOPERS LLP AS FINANCIAL ADVISORS FOR THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS COMES NOW the Official Committee of Unsecured Creditors for Southern Regional Health System, Inc., d/b/a Southern Regional Medical Center, et al., by and through the undersigned counsel, and hereby files the attached Application for an Order Authorizing the Retention and Employment of PricewaterhouseCoopers LLP as Financial Advisors for the Official Committee of Unsecured Creditors. Dated August 27, 2015 LAMBERTH, CIFELLI, ELLIS & NASON, P.A. Counsel for the Committee /s/ Sharon K. Kacmarcik J. Michael Lamberth Georgia Bar No. 431975 jml@lcsenlaw.com Sharon K. Kacmarcik Georgia Bar No. 405717 skk@lcsenlaw.com 3343 Peachtree Road N.E., Ste. 550 Atlanta, GA 30326 404-262-7373 (phone) 404-262-9911 (fax)
Document Page 2 of 25 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION In re SOUTHERN REGIONAL HEALTH SYSTEM, INC. d/b/a/ SOUTHERN REGIONAL MEDICAL CENTER, et al., Debtors. Chapter 11 Jointly Administered Under Case No. 15-64266-wlh APPLICATION FOR AN ORDER AUTHORIZING THE RETENTION AND EMPLOYMENT OF PRICEWATERHOUSECOOPERS LLP AS FINANCIAL ADVISORS FOR THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS COMES NOW The Official Committee of Unsecured Creditors (the Committee ) in the above-captioned bankruptcy cases (the Chapter 11 Cases ), hereby files its application (the Application ), pursuant to section 1103(a) of Title 11 of the United States Code (the Bankruptcy Code ) and Rule 2014 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), for an Order authorizing the Committee to retain PricewaterhouseCoopers LLP (collectively, PwC or the Firm ) as its financial advisors in the Chapter 11 Cases effective as of August 14, 2015. In support of this Application, the Committee submits the Declaration of Steven Fleming, a Principal of PricewaterhouseCoopers LLP (the Fleming Declaration ), attached hereto as Exhibit A and incorporated by reference herein. In further support of its Application, the Committee respectfully states as follows #35130322 v1
Document Page 3 of 25 JURISDICTION AND VENUE 1. The Court has jurisdiction over these matters pursuant to 28 U.S.C. 157 and 1334. These are core proceedings pursuant to 28 U.S.C. 157(b)(2). 2. Venue is proper before this Court pursuant to 28 U.S.C. 1408 and 1409. PROCEDURAL HISTORY 3. On July 30, 2015, debtor Southern Regional Health System, Inc. d/b/a Southern Regional Medical Center and its affiliated debtors 1 filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code (collectively, the Debtors. ) The Debtors remain in possession of their property and continue to operate their business as debtors-in-possession in accordance with Sections 1107 and 1108 of the Bankruptcy Code. 4. On August 6, 2015, the Court entered orders authorizing the joint administration and procedural consolidation of the Chapter 11 Cases. 5. On August 11, 2015, the Office of the United States Trustee organized the Committee and appointed its members. 6. On August 14, 2015, the Committee selected Pepper Hamilton to serve as counsel to the Committee. 1 The Debtors in these cases, along with the last four digits of each debtor's federal tax identification number, are Southern Regional Health System, Inc. (5423), Southern Crescent Physicians' Group, Inc. (5425), Southern Crescent Real Estate, Inc. (5424), Southern Regional Ambulatory Surgery, Inc. (1044), Southern Regional Medical Services, Inc. (4854) and Southlake Ambulatory Surgery Center, LLLP (2588). #35130322 v1-2-
Document Page 4 of 25 THE COMMITTEE S NEED TO RETAIN PWC 7. Owing to the circumstances of the Chapter 11 Cases and the proposed sale of the Debtors largest asset on an expedited basis, it has become clear to the Committee that it must have its own financial advisor to help it sort through the complex financial issues arising in the Chapter 11 Cases.. 8. The Committee has selected PwC because its professionals have considerable experience in performing bankruptcy-related accounting services and financial analyses. SERVICES TO BE PROVIDED BY PWC 9. The Committee respectfully submits that it is necessary to retain and employ PwC to provide, among other things, the following assistance Phase 1 Pre Auction (a) (b) (c) (d) (e) (f) (g) The review of financial information prepared by the Debtors or its consultants as requested by the Committee including, but not limited to, a review of Debtors cash flow projections, Cash Flow Budget, Asset Purchase Agreement, Data Room Materials, etc.; Assist the Committee in developing, evaluating, structuring and negotiating the terms and conditions of offers received on the sale of the Debtor s assets, Assistance in a sale process of the Debtors collectively or in segments, parts or other delineations; Review and analysis of proposed bids and transactions for which the Debtors seeks Court approval; Assist the Committee in developing alternative bids including contacting parties who may be interested in bidding on select groups of assets, as appropriate; Attendance at the auction and meetings including the Committee, the Debtors, creditors, their attorneys and consultants, and Federal and state authorities, if required; and Provide the Committee with other and further financial advisory services with respect to the Debtors, including, general restructuring and advice #35130322 v1-3-
Document Page 5 of 25 with respect to financial, business and economic issues, as may arise during the course of the restructuring prior to the auction; Phase 2 Post Auction (a) Perform a review of the Debtors books and records and other investigations that may be undertaken with respect to pre-petition acts, related party transactions, financial condition of the Debtors, its management, creditors including the operation of their businesses, and, as appropriate, avoidance actions, preferences and fraudulent conveyances; (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) Assist the Committee with the wind down of the Debtors estate; Assisting the Committee in monitoring, assessing, and analyzing the Debtors liquidation of any assets not sold at the proposed auction, including funds flow and cash management, liquidation fees and expenses, analysis of budget to net results, monitoring and analysis of asset based and inventory levels; Assisting the Committee in the formation of a plan of reorganization or as part of a plan of liquidation including modeling analysis of creditor recoveries under various scenarios and comparison to a liquidation analysis; Monitoring of the Debtors activities regarding cash expenditures, receivable collections, asset sales and projected cash requirements; Analysis of any accounts receivable that are not sold as part of the auction process, including advice and assistance with the collection of such receivables; Review of Debtors periodic operating and cash flow statements and assisting the Committee in reviewing the Debtors wind down budget and expenses; Advising the Committee with regard to the Debtors real property and or leasehold interests; Assisting the Committee in reviewing and analyzing actual and potential claims; Assisting the Committee in evaluating employee compensation and benefit issues and claims, including potential severance, bonus, health care and vacation; and Provide expert testimony on the results of our findings. 10. The Committee may request that PwC perform such other services as may be required and are deemed to be in the interests of the Committee in accordance with the Committee s powers and duties as set for the in the Bankruptcy Code. The #35130322 v1-4-
Document Page 6 of 25 Committee seeks authority herein to employ PwC for such matters, in addition to those set forth above, without further order of this Court. PAYMENT OF FEES AND EXPENSES 11. The Committee understands that PwC will receive compensation on an hourly basis, subject to the approval of this Court and in compliance with Bankruptcy Code section 1103, the Bankruptcy Rules, and the United States Trustee s Guidelines for Fees and Disbursements and any such other procedures as may be fixed by order of this Court for professional services rendered by PwC. PwC has agreed to charge the Committee based on the following agreed upon hourly rates adjustment. Personnel Hourly Billing Rate Partner/Principal $725 Director/Senior Manager $575 Manager $475 Senior Associate $375 Associate $300 12. Periodically, PwC s hourly rates are subject to firm-wide 13. The PwC professionals providing services to the Committee will consult with internal PwC bankruptcy retention and billing advisors to ensure compliance with the applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Bankruptcy Rules, guidelines established by the United States Trustee and any other applicable procedures and orders of the Court, as well as to decrease the overall fees associated with the administrative aspects of PwC s engagement. The services provided by these bankruptcy retention and billing advisors shall include, but are not limited to (a) assistance with preparation of the bankruptcy retention documents; (b) assistance with the disinterestedness disclosures; and (c) preparation of monthly fee statements and #35130322 v1-5-
Document Page 7 of 25 interim and final fee applications. Given the specialized nature of these services, specific billing rates exist for these PwC bankruptcy retention and billing advisors. 2 DISINTERESTEDNESS OF PWC 14. Upon information and belief, and except to the extent set forth in the Fleming Declaration, the Firm does not represent and does not hold any interest adverse to the Debtors estates or their creditors in the matters upon which the Firm is to be engaged. 15. However, PwC has represented, represents, and in the future will likely represent, committees in matters unrelated to the Debtors and these cases, whose members are or may be creditors and/or committee members in these cases. The PwC Minneapolis office currently provides independent auditor services, as well as other unrelated services for 3M Company. PwC, however, is not representing any of those entities in this chapter 11 case and will not represent any members of those committees in any claims that they may have collectively or individually against the Debtors, as set forth in the Fleming Declaration. 16. To the best of the Committee s knowledge, information and belief, PwC qualifies as a disinterested person as defined in Bankruptcy Code 101(14). The Committee submits that the employment of PwC would be in the best interest of the Committee, the Debtors and their estates and creditors. 17. Because of the financial services that may be necessary in these Chapter 11 Cases, and the fact that the full nature and extent of such services are not 2 The rate per hour for these PwC bankruptcy retention and billing advisors by level of experience will be as follows Director $550; Manager $400; Senior Associate $290; Associate $225 and Paraprofessional $150. These rates also are subject to periodic adjustments. #35130322 v1-6-
Document Page 8 of 25 known at this time, the Committee believes that the employment of the Firm for all of the Committee s purposes would be appropriate and in the best interests of the unsecured creditor body that the Committee represents. 18. The Committee has requested that the Firm immediately commence work on these cases because of pending motions scheduled for hearings and other pending matters in which the Committee has an interest. Accordingly, the Committee seeks this Court s approval of its retention of the Firm effective as of August 14, 2015, the first date on which the Firm performed services for the Committee. WHEREFORE, the Committee respectfully requests the entry of an order authorizing and approving the employment of PricewaterhouseCoopers LLP as financial advisors for the Committee and granting the Committee such further relief as the Court deems appropriate. Dated August 27, 2015 Respectfully submitted, THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF SOUTHERN REGIONAL HEALTH SYSTEM, INC. d/b/a SOUTHERN REGIONAL MEDICAL CENTER, et al., 3M HEALTH INFORMATION SYSTEMS By/s/ ALAN BROWN, Committee Chair #35130322 v1-7-
Document Page 9 of 25 EXHIBIT A
Document Page 10 of 25 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION In re SOUTHERN REGIONAL HEALTH SYSTEM, INC. d/b/a/ SOUTHERN REGIONAL MEDICAL CENTER, et al. 1, Debtors. Chapter 11 Jointly Administered Under Case No. 15-64266-wlh DECLARATION OF STEVEN FLEMING IN SUPPORT OF THE APPLICATION FOR AN ORDER PURSUANT TO 11 U.S.C. 1103 AUTHORIZING THE EMPLOYMENT AND RETENTION OF PRICEWATERHOUSECOOPERS LLP AS FINANCIAL ADVISORS TO THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS 1. I, Steven Fleming, am a Principal of PricewaterhouseCoopers LLP ( PwC ). PwC is a full service business firm and we intend to use resources from any office or subsidiary of PwC as necessary. 2. This Declaration is submitted in support of the application (the Application ) for an Order Authorizing the Retention and Employment of PricewaterhouseCoopers LLP as financial advisor for the Official Committee of Unsecured Creditors (the Committee ) for purposes of making all required disclosures pursuant to Federal Rule of Bankruptcy Procedure 2014 and to advise the Court of the Firm s qualifications. 1 The Debtors in these cases, along with the last four digits of each debtor's federal tax identification number, are Southern Regional Health System, Inc. (5423), Southern Crescent Physicians' Group, Inc. (5425), Southern Crescent Real Estate, Inc. (5424), Southern Regional Ambulatory Surgery, Inc. (1044), Southern Regional Medical Services, Inc. (4854) and Southlake Ambulatory Surgery Center, LLLP (2588). #35130637 v1
Document Page 11 of 25 3. I have personal knowledge of each of the facts stated in this affidavit, except for those facts stated on information and belief and, as to those facts, I am informed and believe them to be true. If called as a witness, I would testify as to the matters set forth below based upon my personal knowledge, except where otherwise indicated. To the extent that I obtain additional information which requires further disclosure or modification of the Application or this affidavit, a supplemental affidavit will be submitted to the Court. 4. I have read the Application. To the best of my knowledge, the statements in the Application are true and correct, including statements made therein regarding PwC s qualifications and compensation rates. 5. Based on my knowledge of the issues to be addressed in the case, I believe that the representation of the Committee will involve the issues and require the services of the Firm as described in the Application. To the best of my knowledge, PwC and the professionals it employs are well qualified to represent the Committee. 6. This Affidavit is also submitted as the statement required pursuant to sections 327(a), 328(a) and 330 of title 11 of the United States Code (the Bankruptcy Code ), Rules 2014(a) and 2016(b) of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ). 7. Other than the initial communication between my firm and representatives of the Committee of the Debtors with respect to the retention of my firm in this case, neither I nor, to the best of my knowledge, any other member or employee of my firm had any business, or other connection, with the Debtors, its #35130637 v1
Document Page 12 of 25 attorneys, investment banker or financial advisor, or any other party in interest, except as disclosed herein. PwC and its employees are disinterested persons as that term is defined in Section 101 (14) of the Bankruptcy Code. 8. PwC has represented, represents, and in the future will likely represent, committees in matters unrelated to the Debtors and these cases, whose members are or may be creditors and/or committee members in these cases. The PwC Minneapolis office currently provides independent auditor services, as well as other unrelated services for 3M Company. PwC, however, is not representing any of those entities in this chapter 11 case and will not represent any members of those committees in any claims that they may have collectively or individually against the Debtors. 9. I have performed an examination of entities who may be Parties In Interest in these Chapter 11 cases, and to the best of my knowledge except as detailed in paragraph 8 neither my firm nor any associate thereof, has had any connection with the Debtors creditors or any other Party In Interest herein, except PwC may have (a) worked with and/or for the professionals in these chapter 11 cases, or (b) been, or may be currently, engaged as accountants, tax advisors or other consulting services by certain other creditors of the Debtors, although no one professional and/or creditor has generated more than 1% of the firm s revenue. 10. Insofar as I have been able to ascertain, PwC does not represent any other entity having an adverse interest in connection with these cases. 11. To the extent that I discover any facts bearing on the matters described herein during the period of PwC s retention while employed by the #35130637 v1
Document Page 13 of 25 Committee, including becoming engaged by any entity with an adverse interest in connection these cases, I will supplement the information contained in this Affidavit. Phase 1 Pre Auction (a) (b) (c) (d) (e) (f) (g) Phase 2 Post Auction (a) (b) (c) 12. PwC will assist the Committee with the following The review of financial information prepared by the Debtors or its consultants as requested by the Committee including, but not limited to, a review of Debtors cash flow projections, Cash Flow Budget, Asset Purchase Agreement, Data Room Materials, etc.; Assist the Committee in developing, evaluating, structuring and negotiating the terms and conditions of offers received on the sale of the Debtor s assets, Assistance in a sale process of the Debtors collectively or in segments, parts or other delineations; Review and analysis of proposed bids and transactions for which the Debtors seeks Court approval; Assist the Committee in developing alternative bids including contacting parties who may be interested in bidding on select groups of assets, as appropriate; Attendance at the auction and meetings including the Committee, the Debtors, creditors, their attorneys and consultants, and Federal and state authorities, if required; Provide the Committee with other and further financial advisory services with respect to the Debtors, including, general restructuring and advice with respect to financial, business and economic issues, as may arise during the course of the restructuring prior to the auction; Perform a review of the Debtors books and records and other investigations that may be undertaken with respect to pre-petition acts, related party transactions, financial condition of the Debtors, its management, creditors including the operation of their businesses, and, as appropriate, avoidance actions, preferences and fraudulent conveyances; Assist the Committee with the wind down of the Debtors estate Assisting the Committee in monitoring, assessing, and analyzing the Debtors liquidation of any assets not sold at the proposed auction, including funds flow and cash management, liquidation fees and expenses, analysis of budget to net results, monitoring and analysis of asset based and inventory levels; #35130637 v1
Document Page 14 of 25 (d) (e) (f) (g) (h) (i) (j) (k) Assisting the Committee in the formation of a plan of reorganization or as part of a plan of liquidation including modeling analysis of creditor recoveries under various scenarios and comparison to a liquidation analysis; Monitoring of the Debtors activities regarding cash expenditures, receivable collections, asset sales and projected cash requirements; Analysis of any accounts receivable that are not sold as part of the auction process, including advice and assistance with the collection of such receivables; Review of Debtors periodic operating and cash flow statements and assisting the Committee in reviewing the Debtors wind down budget and expenses; Advising the Committee with regard to the Debtors real property and or leasehold interests; Assisting the Committee in reviewing and analyzing actual and potential claims; Assisting the Committee in evaluating employee compensation and benefit issues and claims, including potential severance, bonus, health care and vacation; and Provide expert testimony on the results of our findings. 13. PwC is willing to serve as financial advisor to the Committee and to receive compensation on an hourly basis, subject to the approval of this Court and in compliance with Bankruptcy Code section 1103, the Bankruptcy Rules, and the United States Trustee s Guidelines for Fees and Disbursements and any such other procedures as may be fixed by order of this Court for professional services rendered by PwC. PwC has agreed to charge the Committee based on the following agreed upon hourly rates Personnel Hourly Billing Rate Partner/Principal $725 Director/Senior Manager $575 Manager $475 Senior Associate $375 Associate $300 14. The PwC professionals providing services to the Committee will consult with internal PwC bankruptcy retention and billing advisors to ensure compliance with the applicable provisions of the Bankruptcy Code, the Bankruptcy #35130637 v1
Document Page 15 of 25 Rules, the Local Bankruptcy Rules, guidelines established by the United States Trustee and any other applicable procedures and orders of the Court, as well as to decrease the overall fees associated with the administrative aspects of PwC s engagement. The services provided by these bankruptcy retention and billing advisors shall include, but are not limited to (a) assistance with preparation of the bankruptcy retention documents; (b) assistance with the disinterestedness disclosures; and (c) preparation of monthly fee statements and interim and final fee applications. Given the specialized nature of these services, specific billing rates exist for these PwC bankruptcy retention and billing advisors. 2 15. Periodically, our hourly rates are subject to firm - wide adjustment. 16. PwC will also bill its out-of-pocket expenses, any applicable sales, use or value added tax, and PwC's internal per-ticket charges for booking travel to the Committee. 17. A true and correct copy of the August 21, 2015 Engagement Letter between the Committee and PwC is attached hereto as Exhibit 1. 18. I declare under penalty of perjury that the foregoing is true and correct. This Declaration is made subject to the penalties of 28 U.S.C. 1746 relating to unsworn falsifications to authorities. Dated August 21, 2015 Steven Fleming 2 The rate per hour for these PwC bankruptcy retention and billing advisors by level of experience will be as follows Director $550; Manager $400; Senior Associate $290; Associate $225 and Paraprofessional $150. These rates also are subject to periodic adjustments. #35130637 v1
Document Page 16 of 25 Exhibit 1 Engagement Letter, August 21, 2015 #35130637 v1
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Document Page 25 of 25 CERTIFICATE OF SERVICE This is to certify that the undersigned has this date served a true and correct copy of the foregoing Application for an Order Authorizing the Retention and Employment of PricewaterhouseCoopers LLP as Financial Advisors for the Official Committee of Unsecured Creditors by depositing same in the United States Mail in a properly addressed envelope with adequate postage thereon to J. Hayden Kepner, Jr. J. Robert Williamson Ashley R. Ray Matthew W. Levin SCROGGINS & WILLIAMSON, P.C. 1500 Candler Building 127 Peachtree Street, NE Atlanta, GA 30303 Thomas W. Dworschak OFFICE OF THE UNITED STATES TRUSTEE 362 Richard Russell Building 75 Spring Street, SW Atlanta, GA 30303 Dated August 27, 2015 /s/ Sharon K. Kacmarcik Sharon K. Kacmarcik Georgia Bar No. 405717 skk@lcsenlaw.com #35130322 v1