Foundation HealthCare sells ASC business to Healthcrest Surgical Partners: 5 key notes

Foundation HealthCare sold non-controlling interest in the seven ambulatory surgery centers it owns as well as all assets of Foundation Surgery Management to Healthcrest Surgical Partners.

Here are five things to know:

1. Healthcrest paid $2.5 million in cash and a subordinated promissory note for $2.75 million. The note provides that Foundation will receive interest at a rate of prime plus 2.5 percent per year with a 6 percent floor paid monthly.

2. The first year of the deal beginning Nov. 1, 2016 will be interest-only and then on Nov. 1, 2017 Healthcrest will begin making monthly principal and interest payments on a seven year amortization with a final payment of all principal and interest on Oct. 1, 2019.

3. The promissory note is secured by personal guarantees from Healthcrest principals, but Foundation's security interest and its right to be repaid on the note is subordinated in all respects to the senior lenders of Healthcrest.

4. Foundation plans to use the cash proceeds from the transaction to pay down its line of credit with its senior lenders and focus its resources on managing its majority-owned surgical hospitals, which is the company's primary business.

5. Foundation CEO Stanton Nelson is converting his salary to stock in order to preserve cash, which will allow him to re-invest in the company.

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