Wednesday, August 12, 2020

Another One Bites the Dust: Benevis - Kool Smiles Files For Chapter 11 Bankruptcy

August 3, 2020

Two years after agreeing to pay $23.9 million, plus interest to settle Medicaid fraud allegation Benevis (formerly NCDR, LLC) has filed for Chapter 11 Bankruptcy in the Southern District of Texas. (See Amended Petition here) (See LT Smiles Petition here)

In January 2018 Benevis and it's Kool Smiles branded dental clinics agreed to the settlement after the Department of Justice found the company  "knowingly submitted" false claims for payment to state Medicaid programs for medically unnecessary pediatric dental services.

Benevis and it's Kool Smiles clinics were featured on the first episode of CBS Whistleblower TV program that aired July 13, 2018. (see trailer here)


MARIETTA, Ga.--(BUSINESS WIRE)--Aug 3, 2020--

LT Smile Corporation, along with its subsidiaries Benevis Holding Corporation, Benevis Corporation, Benevis, LLC, Benevis Affiliates, LLC and Benevis Informatics LLC (“Benevis” and “Company”), announced that it has filed voluntary petitions for relief in the Southern District of Texas under Chapter 11 of the United States Bankruptcy Code to effectuate a recapitalization and sale of the business, and to improve its balance sheet and operating position. Benevis and its employees will continue their normal operations and their support of high-quality dental care at supported dental practices throughout the process. None of the Company’s supported dental practices are part of the Chapter 11 filing.

 This is the same scenario as it was with the Small Smiles chain: Chapter 11 first then Chapter 7 soon followed. 

Benevis Corp., which provides back-office services to 150 dental offices, has filed for bankruptcy, saying its revenue fell more than 60% recently due to the coronavirus pandemic.

Benevis claim to provide "back-office" services and that is true, but they also own and operate the clinics using company executives, such as dentists Dale Mayfield, David Veith, and Tu Tran as so called "owner-dentists". Dr. Tran may tried to claim he has nothing to do with the company but he is still being shown as "owner" and "incorporator" of Winchester Dental, PSC d/b/a Ruby Dental and Braces whose address just happens to be the same as Benevis'. Other current and/or past owner-dentists have included dentists Thien Pham and David Strange, Jr.

 Since these places operate on volume and overtreatment (this my own opinion of course, but the DOJ agreed with me) the Corvid-19 pandemic has severely hit their bottom line.

According to Scott Mell's Declaration in the court filings, the companies new Chief Restructuring Officer, the company approximately 70% of the company's income was generated from state Medicaid and CHIP programs.

In the bankruptcy filings:

 The company listed assets and liabilities of as much as $500 million each in its bankruptcy petition. Benevis provides support services to almost 200 dental practices across the U.S., according to its website.

Benevis has lined up as much as $30 million in financing from current lenders including New Mountain Finance Corp., according court papers. New Mountain has also agreed to serve as the stalking horse bidder for the company.

Benevis has secured committed financing from its current lenders; including New Mountain Finance Corporation and several of its credit investing affiliates, to bolster liquidity and enhance ongoing operations during the reorganization process.

Scott Hornbuckle, Chief Financial Officer for Benevis stated, “The additional financing and the reorganization process will help us strengthen our balance sheet and solidify our path to future success. We look forward to continued investments in the future and the continuation of our long history of supporting outstanding dental care.”

Benevis’s legal advisor for the reorganization is Jackson Walker. Conway Mackenzie and Lincoln International LLC are serving as financial advisors to the Company.

Admittedly I nearly choked and puked on the "outstanding dental care" statement. 

Below is the corporate structure according to Scott Mell and was included in his Declaration on page 4.

Maybe it's just me, but I think there might be a few things left out of this little stick drawing. 

In the Amended Petition it lists the 30 largest unsecured creditors.  Henry Schein, Inc., holds the number one spot with Benevis owing them $3,671,336.72!  WHOA!  

LT Smiles Bankruptcy Petition shows the Equity Security Holders as this. To save you some time, that address is New Mountain Capital.

New Mountain Capital SEC Filings

Another familiar name I noticed on the creditors list is Tailwind Capital. They are the PE firm that bought Lone Peak Management Group located in Utah and their Smiles 4 Kids clinics, mostly located in the Northwest. In 2018 a whistleblower came forward with serious allegation against the company and it's leadership.