Cano Health: RSA-Backed Chapter 11 Reorganization in Delaware
Cano Health Feb 2024 Delaware ch. 11 under an RSA confirmed a reorganization plan in June 2024.
Cano Health, Inc. filed chapter 11 cases in Delaware on February 4, 2024 with a prearranged restructuring support agreement and a financing package designed to keep clinics operating while the debtors executed a fast, court-supervised recapitalization. The company positioned the cases as a continuity-of-care reorganization for a value-based primary care platform, with a DIP facility and a plan timeline that targeted confirmation and effectiveness within roughly five months of the petition date.
Reporting tied Cano's distress to Medicare Advantage profitability pressure, cost trends, and capital market deterioration, while the court filings focused on preserving patient care operations during the restructuring.
| Debtor(s) | Cano Health, Inc. and numerous affiliates (jointly administered) |
| Court | U.S. Bankruptcy Court, District of Delaware |
| Case Number | 24-10164 |
| Petition Date | February 4, 2024 |
| DIP Facility | $150 million multi-draw DIP term loan facility |
| Confirmation Date | June 28, 2024 |
Prearranged Reorganization and Emergence
Business model. Cano Health operated a value-based primary care platform focused on coordinating medical services through licensed physicians and a network of independent physician practices. The First Day Declaration described contracting with approximately 630 independent physician practices (described as physician affiliates) and emphasized the operational mechanics of collecting payor payments and remitting contractually negotiated shares to physicians and other providers. The declaration also described a workforce of approximately 2,800 full-time employees at filing (plus a small part-time and supplemental workforce), including physicians, nurses, and other specialized clinical staff.
Reporting framed Cano as a primary care provider serving seniors and Medicare populations, with a footprint that (before the restructuring) extended beyond Florida into multiple markets. Post-emergence reporting indicated the reorganized company narrowed its footprint materially, with one outlet reporting the reorganized business operated only in Florida after the restructuring and reduced its location count versus prior levels.
In first-day papers, the debtors described continued use of cash management, timely payment of employees, and maintenance of refund programs as necessary to continue operating and receiving capitation-related payments under applicable contracts and program rules.
Distress factors. External reporting tied Cano's downturn to a decline from a once-high valuation, with payor economics and medical costs as recurring themes. Reporting described Medicare Advantage payment model changes and their effect on risk-bearing providers including Cano, alongside operating losses in 2022 and 2023.
Separately, public-market deterioration was visible before the filing. Reporting described a NYSE warning tied to market capitalization levels and noted that the company did not intend to appeal the NYSE determination. Reporting indicated Cano carried $1.3 billion in debt at the time of filing.
Prepetition retrenchment. Cano took several prepetition steps to reduce costs and preserve liquidity.
- Reporting described layoffs of 700 employees (about 17% of the workforce) and a plan to exit several markets in 2023 while the company explored strategic alternatives.
- Reporting described a sale of clinics to Humana's CenterWell in Texas and Nevada for $66.7 million, including cash proceeds, with commentary that the liquidity helped address covenant pressure and near-term solvency concerns.
Leadership and governance context. Cano announced a leadership change in 2023 in which founder Marlow Hernandez stepped away from the CEO role and Mark Kent became permanent CEO after serving as interim CEO.
DIP financing and cash collateral. Cano's chapter 11 was financed through a combined DIP and cash collateral structure described in the DIP Motion that carried both conventional interest pricing and equity-linked economics. The financing was paired with milestones, reporting cadences, and liquidity controls.
The table below summarizes selected DIP terms described in bankruptcy filings.
| Term | Description |
|---|---|
| Facility type | Superpriority, senior secured, multiple draw DIP term loan facility. |
| Facility size and draws | $150 million total, with $50 million initial draw available at interim order and up to $100 million additional upon final order. |
| Interest | SOFR + 1,100 bps or ABR + 1,000 bps; default + 2.00%. |
| Fees | 7.5% backstop fee paid-in-kind (added to principal) and 15% participation fee payable in reorganized equity (or cash if a whole-company sale occurred). |
| Liquidity covenant | Weekly minimum liquidity covenant of $20 million, with reporting and covenant references reflected in the final order. |
| Milestones | IOI deadline for a whole-company transaction process, final order timing, disclosure statement approval, confirmation, and effective date deadlines (with potential regulatory-related extensions). |
The Final DIP Order authorized up to $150 million of DIP borrowings inclusive of the initial $50 million and established a weekly liquidity reporting cadence alongside budget and variance reporting mechanisms.
Fee reserve and carve-out mechanics. The Final DIP Order created a fee reserve account to fund professional fees and described a carve-out that included U.S. Trustee fees, patient care ombudsman fees, and chapter 7 trustee fees.
| Protection | Description |
|---|---|
| Fee reserve account | Segregated account funded to pay allowed professional fees, insulated (subject to reversionary interest) from DIP lender liens while in the account. |
| Carve-out coverage | Included Clerk/UST fees, chapter 7 trustee fees up to $50,000, patient care ombudsman fees up to $200,000, and allowed professional fees with a post-trigger cap of $4.75 million. |
Parallel sale process. The DIP motion described a parallel process for soliciting indications of interest for a potential whole-company transaction alongside the plan timeline.
Disclosure statement and plan solicitation. The debtors obtained an order approving the Disclosure Statement and solicitation procedures in May 2024. This was followed by the Modified Fourth Amended Plan filing in late June and confirmation on June 28, 2024.
The debtors reached an agreement with the official unsecured creditors' committee in connection with the disclosure statement approval.
Plan treatment. Cano's Confirmed Plan included a capital structure reset supported by the RSA and implemented through new equity issuance, warrant packages, and a litigation trust structure. The plan distinguished between RSA-aligned general unsecured creditors and non-RSA general unsecured creditors and delivered different consideration streams to each.
The following table summarizes key treatment mechanics as described in the plan.
| Stakeholder group | Class | Consideration |
|---|---|---|
| First lien claims | Class 3 | Pro rata share of (i) exit facility loans (if any), (ii) 100% of new equity (subject to dilution), and (iii) if applicable, discrete asset sale proceeds. |
| RSA general unsecured claims | Class 4 | Pro rata share of GUC warrants. |
| Non-RSA general unsecured claims | Class 5 | Pro rata share of an MSP cash amount, any incremental non-RSA cash, and litigation trust interests. |
Litigation trust. The plan established a litigation trust structure designed to hold litigation trust interests for non-RSA general unsecured creditors and to pursue certain causes of action and claim reconciliation functions as described in the plan and related documents. The plan also described liquidating trust tax structuring concepts (grantor trust design) and allocated specific roles between the reorganized debtors and the litigation trustee in the claims reconciliation process.
Side-car resolution and global settlement. The Confirmation Order approved a "side-car resolution" and a "global settlement" described as foundational to plan implementation and necessary for an efficient resolution for parties in interest.
Exit facility and backstop parties. The confirmation order authorized the debtors and reorganized debtors to enter into an exit facility and referenced a term sheet in the plan supplement. Exit lenders/backstop parties included affiliates or designees of Anchorage Capital Advisors, Diameter Capital Partners, Eaton Vance Management & Boston Management and Research, Nut Tree Capital Management, Sound Point Capital Management, and Squarepoint Ops LLC. The backstop fee and commitment fee under the exit facility term sheet were described as administrative expenses satisfied through issuance of new equity interests to the exit facility lenders on the effective date.
Effective date. The plan became effective on June 28, 2024, with the Effective Date Notice stating that all conditions precedent were satisfied or waived and that plan releases, exculpations, discharges, and injunctions were effective as of the effective date.
A Cano press release stated that the plan converted more than $1 billion of prepetition funded debt into a combination of common stock and warrants and that existing investors committed more than $200 million in new capital, alongside claims of cost reductions and productivity improvements achieved. Emergence reporting described the reorganized business as private and operating in Florida with more than $200 million in funding.
Post-emergence footprint. Multiple sources described a narrowed post-emergence operating footprint. One outlet reported Cano reduced from 143 to 83 locations and operated only in Florida after emergence. Another source reported the reorganized business emerged with Florida locations and $200 million in funding and provided regional detail across South Florida and other Florida metros.
Claims and noticing agent. The court entered an order authorizing the debtors to employ and retain Kurtzman Carson Consultants LLC as claims and noticing agent effective as of the petition date. The confirmation order noted that KCC changed its name to KCC dba Verita Global and identified Verita's role in balloting and tabulation as part of the confirmation record.
Case timeline. Cano's case moved from petition to plan effectiveness in approximately five months.
| Date | Milestone |
|---|---|
| Feb. 4, 2024 | RSA and filing announced; chapter 11 cases commenced |
| Feb. 7, 2024 | Interim DIP Order entered |
| Mar. 6, 2024 | Final DIP Order entered (including fee reserve and carve-out framework) |
| May 21, 2024 | Disclosure Statement approved; solicitation package filed |
| Jun. 27, 2024 | Modified Fourth Amended Plan filed |
| Jun. 28, 2024 | Confirmation hearing held; plan confirmed |
| Jun. 28, 2024 | Plan effective date (conditions satisfied or waived) |
| Jul. 2024 | Emergence announced publicly |
Frequently Asked Questions
When did Cano Health file chapter 11, and where? Cano Health filed chapter 11 cases on February 4, 2024 in the U.S. Bankruptcy Court for the District of Delaware. Reporting contemporaneous with the filing also described the Delaware venue and the restructuring support agreement.
What kind of healthcare business was Cano Health running at filing? Court filings described Cano as a value-based patient care provider coordinating medical services through licensed physicians and a network of independent physician practices, with significant patient-care operations that required continuity through the restructuring. Reporting described Cano as a primary care provider serving seniors and Medicare populations.
How large was Cano Health at filing (employees and provider network)? First-day filings described a workforce of about 2,800 full-time employees (plus part-time and supplemental labor) and described contracting with approximately 630 independent physician practices.
Why did reporting focus on Medicare Advantage profitability and medical cost pressure? Coverage described Cano as a risk-bearing provider in Medicare Advantage and linked Cano's troubles to profitability pressure and reimbursement changes. Another outlet reported a 103.5% medical loss ratio.
What was the DIP financing? Bankruptcy filings described a $150 million multiple draw DIP facility with milestone and reporting requirements. The Final DIP Order authorized borrowings up to $150 million inclusive of initial borrowings and included fee reserve and carve-out protections.
What did the plan provide to first lien lenders? First lien claims received distributions including new equity interests (subject to dilution from participation fees and other issuances), potential exit facility loans, and other components described in the plan.
Why were general unsecured creditors split into RSA and non-RSA categories? The plan distinguished between RSA general unsecured claims and non-RSA general unsecured claims. RSA GUC claims received warrants, while non-RSA GUC claims received a blend of cash components and litigation trust interests.
What is the litigation trust? The plan established a litigation trust to hold litigation trust interests for certain creditor constituencies and to pursue specified causes of action and claim reconciliation roles, with tax structuring described as a liquidating/grantor trust framework.
What happened at emergence and how did the company describe the outcome? Cano's emergence press release stated the company converted more than $1 billion of debt into a combination of common stock and warrants and raised more than $200 million in new capital, alongside claims of cost reductions and portfolio streamlining. Reporting described the reorganized business as private and narrowed in footprint.
Who is the claims agent for Cano Health?
Kurtzman Carson Consultants (Verita Global) serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.
For more chapter 11 case coverage, visit the ElevenFlo bankruptcy blog.
This article was researched and written with AI assistance, using court filings, public records, and news sources. AI-generated content can contain errors. Verify all information against primary sources before relying on it. This is not legal or financial advice. Read our full disclaimer.