Millennium Health Said in Bankruptcy Talks Before Settlementby and
Lab-testing company said to offer ownership to lenders
Millennium said to reach $275 million agreement with U.S.
Millennium Health LLC is closing in on a deal with lenders to restructure the company in bankruptcy court, according to people with knowledge of the matter.
The largest U.S. drug-testing lab is finalizing the plan as it makes arrangements by next week to pay a $275 million settlement of a federal probe, said the people, who asked not to be identified because the discussions are private.
Millennium has offered the creditors control of the company, the people said. In exchange, the lenders wouldn’t pursue potential legal claims against owners including founder James Slattery and private-equity firm TA Associates that the probe wasn’t disclosed to investors while the company was marketing the $1.8 billion loan last year, the people said.
The current equity holders would provide funds to Millennium so it can pay the settlement reached this week with the U.S. Department of Justice over allegations of overbilling a federal health-care program and other matters, said the people. A group of owners, including Slattery, would provide most of the funds, while TA Associates would pay a minority share, they said.
Nicole Beckstrand, a spokeswoman for San Diego-based Millennium, Marcia O’Carroll, a spokeswoman for Boston-based TA Associates, and Nicole Navas, a Justice Department spokeswoman, declined to comment. Beckstrand declined to comment on behalf of Slattery.
Lenders have been in talks with the company for at least three months. They started poring over documents and financial information after Millennium disclosed that the Centers for Medicare & Medicaid Services threatened to revoke the company’s ability to charge Medicare and Medicaid and that first-quarter earnings dropped by more than 30 percent, people with knowledge of the matter said earlier this year.
The company’s loan plunged, falling from above par in April to 43 cents on the dollar in July, according to prices compiled by Bloomberg.
Millennium, which sells urine-testing services to monitor prescription drug use and potential abuse, said it reached an agreement in principle with the Justice Department in June. The agreement would “resolve all federal and state issues involving the company,” Beckstrand said at the time. The federal probe was disclosed to all “pertinent parties” at the time its loan was marketed, and was also cited in media reports and legal filings, she said in July.