By Dietrich Knauth
(Reuters) – The Center for Autism and Related Disorders, which operates 130 treatment centers in the U.S., filed for bankruptcy in Texas on Monday with a plan to sell itself back to its founder.
The center suffered an $82 million net loss in the 12 months ending April 2023, largely as a result of long-term impacts of the COVID-19 pandemic in the U.S., according to court filings in the Houston bankruptcy court.
The company is majority-owned by the private equity firm Blackstone Inc, and it intends to sell itself in bankruptcy. It has a $25 million offer in hand from Dr. Doreen Granpeesheh, who founded the center in 1990.
Granpeesheh stepped down as CEO when the company was sold to Blackstone in 2018, but she retained a 21% equity stake. A sale to Granpeesheh would provide a “seamless transition” for the company’s 3,500 patients and allow the company to retain the majority of 2,500 employees, according to court filings.
Based in Henderson, Nevada, the company specializes in applied behavioral analysis therapy for children diagnosed with autism spectrum disorder.
The pandemic contributed to a shortage of qualified behavioral therapists, a sharp decline in revenue from in-person therapy at the center’s physical locations, and a long-term shift to telehealth services, according to court filings.
The company’s finances have also been affected by rising interest rates on its $245 million debt, unsustainable rent costs for its 130 locations, and unprofitable long-term contracts with government and commercial healthcare providers, according to court filings.
The company entered into long-term reimbursement contracts with healthcare providers between 2012 and 2016, locking in reimbursement rates that have not kept pace with inflation and increasing wage pressures, according to the company’s court filings. It reported $160 million in revenue for the 12 months ending in April 2023.
The center entered bankruptcy with just $2 million in cash on hand, and it intends to fund its bankruptcy with an $18 million loan from its primary lender, Ares Capital Corp.
Autism diagnoses in the U.S. have steadily risen over the past two decades, and the U.S. Centers for Disease Control and Prevention estimated in 2020 that about one in 36 U.S. children have autism spectrum disorder.
The case is Center for Autism and Related Disorders, U.S. Bankruptcy Court for the Southern District of Texas, No. 23-90709.
For the company: Christopher Greco and Allyson Smith of Kirkland & Ellis
Read more:
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(Reporting by Dietrich Knauth)
