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Wellpath Prepares Plan to Exit Bankruptcy
Prison healthcare giant Wellpath took a step closer toward exiting bankruptcy proceedings on April 15, 2025, when it announced a settlement reached with a group a notch below those senior creditors first in line for repayment. That group of junior creditors includes prisoners and their survivors who have successfully sued the firm for causing their injuries or deaths at the 420 prisons and jails where it holds the contract to provide healthcare.
Saddled with $644 million in debt, Wellpath entered bankruptcy in November 2024, setting off a wave of judicial orders staying pending litigation that rippled through courts across the country. The firm spun off its behavioral health unit, Wellpath Recovery Solutions, to a group of lenders in exchange for $375 million of that debt.
Meanwhile those who had won a verdict or secured a settlement which the firm had not yet paid waited on the creditors’ committee appointed by the federal bankruptcy court for the Southern District of Texas to negotiate a settlement.
The agreement that was reached provides those junior creditors a total of $15.5 million in cash, plus a 33.3% ownership in the reorganized company, Wellpath attorneys told U.S. Bankruptcy Judge Alfredo Perez. The creditor’s committee agreed that it offered a shot at “meaningful recovery” of outstanding balances due. In addition to litigants, the list of junior creditors includes medical suppliers, pharmacies and subcontracted providers.
“This is what we’ve been fighting for since the beginning of this case,” said committee attorney Nicholas Zluticky.
“This was a tough case, and it is still a tough case, and I really commend you for getting it to the finish line,” Perez told the parties at the hearing.
Wellpath’s private equity owner, HIG Capital, will fund $3 million of the cash needed for junior creditor settlement. That’s about one twenty-three thousandth of the $69 billion in assets that HIG Captial owns or manages. On top of the promised cash and their ownership share of the new Wellpath, junior creditors will hold $10 million in new debt, secured by bonds that the reorganized company will issue, according to Wellpath attorney Felicia Permian of McDermott Will & Emery. See: In re Wellpath Holdings Inc., USBC (S.D. Tex.), Case No. 24-90533.
Additional source: Reuters News
