OKLAHOMA CITY, Oct. 27, 2016 — Foundation HealthCare, Inc. (OTCQB: FDNH), which is an owner and operator of surgical hospitals, announced today the Company has sold the non-controlling interests it owned in seven ambulatory surgery centers (“ASCs”) and substantially all the assets of Foundation Surgery Management, LLC (“FSM”) to Healthcrest Surgical Partners, LLC (“Healthcrest”). The principals of Healthcrest were the management of the Company’s ASC division prior to the transaction.
At closing, Foundation received $2.5 million in cash and a subordinated promissory note for$2.75 million. The note provides that Foundation will receive interest at a rate of prime plus 2.5% per year, with a floor of 6%, payable monthly. The first year will be interest only beginning November 1, 2016 then beginning on November 1, 2017, Healthcrest will make monthly principal and interest payments based on a seven year amortization with a final payment of all principal and interest on October 1, 2019. The promissory note is secured by personal guarantees from the principals of Healthcrest, but Foundation’s security interest and its right to be repaid on the note is subordinated in all respects to the senior lenders of Healthcrest.
Foundation will use the $2.5 million from the proceeds from the transaction to pay down it’s line of credit with its senior lenders. “This sale will allow Foundation to focus all its resources and energy on our primary business which is the management of our majority-owned surgical hospitals,” said Stanton Nelson, Foundation’s CEO.
In addition, Stanton Nelson, CEO announced today that he is converting his salary to stock in order to preserve cash. “For the foreseeable future, I have made the decision to convert my salary to stock as a way to preserve cash but also allows me to re-invest in a company I really believe in,” stated Nelson.