Benefytt Technologies emerges from Chapter 11 bankruptcy

By Sarah Lizee

Olympia, Wash., Sept. 12 – Benefytt Technologies, Inc.’s Chapter 11 plan of reorganization went into effect on Monday, according to a notice filed with the U.S. Bankruptcy Court for the Southern district of Texas.

As previously reported, the plan, which was confirmed on Aug. 30, enjoyed unanimous support from prepetition secured lenders and contemplated splitting the company into an operating company (OpCo) and a cash flow company (CFCo).

Debtor-in-possession lender and equity sponsor Madison Dearborn Partners, LLC will indirectly own 92.5% of the OpCo through a credit bid of amounts outstanding under a $35 million debtor-in-possession facility, subject to a higher and better bid, and CFCo will indirectly own the remaining 7.5%.

The debtors’ operations and employees will be housed in OpCo.

Separately, the debtors’ prepetition term lenders will own the equity of CFCo.

CFCo will hold certain assets, including the debtors’ existing contract assets. As the existing contract assets are liquidated, proceeds will be distributed to creditors in line with the priority of their respective claims against the debtors.

Under the plan, holders of other secured claims were to receive payment in full in cash, the collateral securing their claims, reinstatement of their claims or other treatment leaving the claims unimpaired.

Holders of other priority claims were to receive payment in full in cash or other treatment leaving the claims unimpaired.

Each holder of a revolving credit facility claim was to receive their pro rata share of new first-out loans under a new first-lien term loan facility in an amount equal to its allowed claim, which was to be repaid under the existing contract asset collections waterfall.

Each holder of an allowed term loan claim was to receive its pro rata share of the new second- and third-out loans under the new first-lien term loan facility and 100% of the new common equity.

Each holder of a general unsecured claim was to receive its pro rata share of GUC trust beneficial interests, provided holders could choose a cash-out recovery in lieu of any distributions from any other GUC trust assets, with the cash-out recovery capped at 25% of their respective allowed claims.

Holders who didn’t elect the cash-out recovery and didn’t opt out of the third-party release were to receive their pro rata share of the proceeds of the initial trust assets and the upside recovery.

The initial trust assets include $500,000 contributed by the debtors and preferred equity interests in CFCo.

The upside recovery includes the $750,000 contributed by OpCo to the GUC trust no later than two years after the effective date; $750,000 contributed by CFCo to the trust after the second anniversary of the effective date (or earlier following full satisfaction of the new first-out loans); unspent critical vendor amounts, the GUC litigation claims and proceeds, and retained preference actions and proceeds.

Holders who didn’t elect the cash-out recovery and do opt out of the third-party release were to receive their pro rata share of the proceeds of the initial trust assets.

Intercompany claims were to be reinstated, contributed, distributed, canceled, released, extinguished, converted into equity or otherwise settled.

Intercompany interests were to be reinstated, set off, settled, distributed, contributed, merged, canceled or released.

Holders of existing equity interests and section 510(b) claims were to receive nothing.

Benefytt is a health insurance technology company based in Tampa, Fla. The company filed bankruptcy on May 23 under Chapter 11 case number 23-90566.

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