World Health hires turnaround firm
World Health Alternatives Inc. disclosed its poor financial condition in securities filings Friday and said its ability to stay in business depends on its lender continuing to extend funding.
The troubled medical staffing company, based in Wilkins, also said in a filing with the Securities and Exchange Commission that it hired a turnaround management firm, Alvarez & Marsal LLC of New York, and appointed a chief restructuring officer to work with current management to evaluate its business plan and financial structure.
Alvarez & Marsal worked in the late 1990s with the troubled Allegheny Health Education Research Foundation, former parent of Allegheny General Hospital, and a number of other hospital and medically related entities on both sides of the state.
Executives at World Health and Alvarez & Marsal could not be reached for comment.
According to filings, World Health is surviving by continuing to tap a revolving loan fund from CapitalSource Finance LLC of New York. As of Aug. 30, World Health had borrowed $20.9 million of $35 million available under the revolving loan. In addition, it has borrowed $6.7 million from a $7.5 million term loan from CapitalSource. World Health also is in violation of terms of the loans, the filings said.
"The company currently has a liquidity deficiency," World Health said in the filing. A $4 million bridge loan, made with another lender and dated Aug. 18, has been exhausted -- used to fund operations.
"The lender (CapitalSource) is not obligated to continue to provide forbearance or continued funding to the company," the filings said.
World Health said in a statement that Scott Phillips, an Alvarez managing director, was appointed chief restructuring officer, and that Dr. David Friend, also an Alavarez managing director, had been named an executive of the company.
"Alvarez & Marsal has a long and successful track record working with companies in the health care industry to drive performance improvement and reach business objectives," said John Sercu, World Health's interim president and CEO.
World Health's problems came to light last month when co-founder and former CEO Richard McDonald resigned, citing health and family reasons. Days later it was revealed that McDonald, who held nearly every significant financial position in the company, had entered into secret agreements to raise funds for what rapidly was becoming a cash-starved company.
In another development, accounting firm Daszkal Bolton LLP of Boca Raton, Fla., in a letter to the SEC, said it disagreed with some statements made by World Health when it dismissed the firm as its accountant on Aug. 19.
Daszkal Bolton said it disagreed with the company on accounting principles, financial statement disclosure or auditing procedures that were not resolved to Daszkal Bolton's satisfaction. Thus, it could not complete a review of the three- and six-month financial reports World Health submitted for review.