Wellpath Holdings, Inc., a leading provider of medical and mental health services to correctional facilities, inpatient treatment centers, forensic treatment facilities, and civil commitment centers across approximately 420 facilities in 39 states, filed for Chapter 11 protection on November 12, 2024 in the Southern District of Texas (Case No. 24-90533) amid pandemic-era labor cost inflation, escalating litigation costs from wrongful death claims, and contract performance deterioration. The debtor obtained a $522.4 million DIP facility ($105M new money + $417.4M roll-ups) and conducted a two-track sale process: Recovery Solutions assets sold to RS Purchaser LLC (releasing ~$395M in DIP liabilities and assuming liabilities), and noncorrections assets sold to private buyers for assumption of liabilities. The Further Modified Plan was confirmed on May 1, 2025, reducing debt by approximately $550 million through asset sales, a takeback facility, and equity financing. First lien holders received 3% of new Class A equity (subject to dilution) and $124.2 million of takeback facility; deficiency and unsecured creditors received beneficial interests in a liquidating trust. Wellpath emerged on May 12, 2025 with ownership transitioned to an ad hoc lender group. Post-emergence, the company maintained uninterrupted service delivery with $35M+ unrestricted cash target and a $10M liquidating trust takeback facility.
