Integrated Healthcare Holdings Inc (fka IHCH)

[dannol48]

The Warrents on the 7 Cent buyout structure would fully dilute into the 660+ Million share range for IHCH.

That brings the buyout price at 7 cents in-line with recent public disclosure of business valuation of $23 Million (at best) or about 2x value for buyout.

The 405 Million warrants were issued in April 2010 to Dr. Chaudhuri (KPC Group) prior to his registration with SEC to buyout the remaining OS (see his 13-D). The warrants were issued as part of the bankruptcy debt buyout of $81 Million (for $70 Million) by Chaudhuri and Silver Point. Silver Point bankrolled the deal (they are a very big hedge fund and watch the shorting on this run, per prior posted advise). Chaudhuri traded 96 Million of the 405 Million warrants to Silver Point for 15% interest in the debt.

The warrants held by Chaudhuri are broken into 170M personal and 139M held by KPC Resolution. At 7 cents, the 139M could operate as a residual debt exchange for final buyout (IMO) or about $9.73 Million. That would be residual debt of the partners being bought-out. In that instance, the debt is apportioned according to ownership positions of the partners and buyout payment operates as debt resolution against formula.

Here's the KPC Group website already showing the hospitals he owns and includes the IHCH group that he majority ownes, so please don't suggest he doesn't intend to close on the deal:

http://www.thekpcgroup.com/kpc.html

Note, he added Victorville to the list last fall on completing that bankruptcy buyout.

Couple of points....

1. The quarter topline reflects two years of catch-up QAF money for two (CA) fiscal years, July 2011 through June 2013. So, similar to summer of 2011, this is a big one-time windfall of old, overdue, QAF money.

2. Only the FY2012 (ending June 2012) was paid (cash on the books). They're waiting on the final approval for fee collection and payment by CMS for the FY2013 money. See the cashflow sheet for the fees due and payment coming. On standby for that approval. I'm crunching numbers now, but that is possibly sufficient additional cash to trigger buyout (IMO). The iHub board could be blindsided by payment approval, as they have up to 10 business days to put on the State website. However, Chaudhuri will know the minute the approval hits. Obviously, they (and others) are tied into the system. All I have at this point is a rumor on the situation, and I don't like repeating rumors.

3. The registered buyout is an insider, partner buyout with the goal of nearly debt free business with primary target to payoff the Silver Point real estate loan (see balance sheet for the big $45+ Million loan). Silver Point is the hedge that's holding 96 Million of those warrants obtained at between 5 and 6.125 cents and short dumping (IMO) into runs to make money the way any hedge makes money. Resolving the big real estate loan that's collateralized against the partner's real estate interest (the land and buildings) will help the partners (back to Tenet buyout days in 2005) make better money on the real estate lease and give Chaudhuri a better position to take the business. This is the first opportunity since the bankruptcy debt buyout to reach goal, i.e. sufficient cash on the books to close the deal. This is why closure was waiting for cash to complete the deal (IMO).

4. QAF radically changes in the new Bill and operates in the new Obamacare paradigm to re-prioritize how QAF money is spent with hospitals at #4 priority on the current list (current unpassed Bill). Read the bill! Obamacare operates around insurance, e.g. the Children's Healthcare Insurance Program (CHIP) in California....buying insurance for kids. #2 on the list is coverage for kids. Disproportionate Share is also phased-out for hospitals starting in 2014. The Bill is for the two year transition period of CY2014-15. The saftey-net programs (back-end money in old paradigm) phase-out to a fully-insured coverage system over the next two years. In simple terms, as money moves to insured patient coverage and payment at the front, it phases-out at the back in these large lump payments.

5. The problem with the new paradigm is whether hospitals will get as much money as they did with the old system, especially those that were heavy in the disproportionate share monies. Also, many hospitals have lower admissions and bed occupancy rates due to the rules and standards for admissions. Medicare cuts are also hurting. The major admissions drop at IHCH since 2008 (now over 25% in run rate) is a concern going into a new paradigm that is primarily dependent on admissions with insured patients and their ability to pay uncovered/deductible costs.