14. SUBSEQUENT EVENTS

9 Months Ended

Dec. 31, 2012

Subsequent Events [Abstract]

14. SUBSEQUENT EVENTS

NOTE 14 – SUBSEQUENT EVENTS

Amendment to Credit Agreement with Silver Point

On February 7, 2013, Integrated Healthcare Holdings, Inc. (“IHHI”) and its subsidiaries WMC-A, Inc., WMC-SA, Inc., Chapman Medical Center, Inc. and Coastal Communities Hospital, Inc. (together with IHHI, the “Company”), entered into an “Amendment and Restatement to the Credit Agreement” (the “Amendment”) with SPCP Group IV, LLC, SPCP Group, LLC, and Silver Point Finance, LLC, as the Lender Agent (collectively, the “Silver Point Entities”), Pacific Coast Holdings Investment, LLC (“PCHI”) and Ganesha Realty, llc (“Ganesha”).

Under the Amendment, the $80,000,000 Credit Agreement, dated as of October 9, 2007, as amended, to which IHHI and the Silver Point Entities are parties (the “Credit Agreement”) was amended and restated in its entirety in the form of the “Amended and Restated Credit Agreement ($47,277,000 Term Loan)” attached as Exhibit A to the Amendment (the “Restated Credit Agreement”). The Restated Credit Agreement reflects changes to the terms of the Credit Agreement that were previously made under various amendments entered into by the Company since inception of the Credit Agreement in October 2007.

In addition, the following new amendments were made to the Credit Agreement and reflected in the Restated Credit Agreement:

· The Stated Maturity Date was extended to April 13, 2016. The Credit Agreement was previously due to mature on April 13, 2013.

· The annual interest rate applicable to the loans under the Credit Agreement was modified from the previous fixed rate of 14.5% to LIBOR plus 10%, with the LIBOR floor set at 2% (the effective interest rate is currently 12%), except upon an Event of Default. The Company may elect from one, two or three months LIBOR interest periods, except in an Event of Default when the interest period may not exceed one month.

· The principal balance under the Credit Agreement was increased from $46,350,000 to $47,277,000 to reflect new borrowings by the Company under the Restated Credit Agreement.

· The Company repaid all amounts owing to SPCP Group IV, LLC under the Credit Agreement, consisting of a principal balance of $8,119,634 plus accrued interest of $19,622, and increased the principal amount owing to SPCP Group, LLC under the Credit Agreement by $9,046,634 to reflect the repayment to SPCP Group IV, LLC and other new borrowings.

· The financial covenants applicable to the Company under the Credit Agreement were amended, including the covenants requiring the Company to maintain minimum levels of EBITDA (as defined in the Restated Credit Agreement).

· Upon receipt by the Company of enhanced federal matching funds from Medi-Cal under the Quality Assurance Fee Program (defined as “Net QAF Funds” under the Restated Credit Agreement), the Company is required to make certain prepayments of principal under its Revolving Loan Agreement with MidCap Financial, LLC.

· A prepayment fee was established for voluntary prepayments under the Credit Agreement equal to 5% for prepayments made on or prior to December 31, 2013, and 2% for prepayments made after January 1, 2014 and before December 31, 2014.

Warrant Transactions

In connection with the Amendment, on February 7, 2013, IHHI entered into the following transactions involving warrants:

IHHI entered into a Warrant Repurchase Agreement with SPCP Group IV, LLC pursuant to which IHHI repurchased the outstanding Common Stock Warrant issued to SPCP Group IV, LLC on or about April 13, 2010 (the “Cancelled Warrant”). The Cancelled Warrant entitled the holder to purchase an aggregate of 16,817,365 shares of IHHI Common Stock at an exercise price of $0.07 per share. The Cancelled Warrant was repurchased by IHHI for a purchase price of $0.12 per share minus the exercise price of $0.07 per share, or a net purchase price of $0.05 per share, multiplied by 16,817,365 shares exercisable under the Warrant, or an aggregate purchase price of $840,868.25.

Immediately following the warrant repurchase, IHHI issued a new Common Stock Warrant to SPCP Group, LLC for a price of $0.05 per share, on the same terms as the Cancelled Warrant entitling the holder to purchase an aggregate of 16,817,365 shares of Common Stock at an exercise price of $0.07 per share, except that the new warrant expires on April 13, 2016.

Also simultaneous with the transactions described above, IHHI extended the expiration date from April 13, 2013 to April 13, 2016 for (i) the warrant held by SPCP Group, LLC to purchase 79,182,635 shares at an exercise price of $0.07 per share, (ii) the warrant held by Dr. Kali P. Chaudhuri, M.D. to purchase 170,000,000 shares at an exercise price of $0.07 per share, and (iii) the warrant held by KPC Resolution Company, LLC to purchase 139,000,000 shares at an exercise price of $0.07 per share. The extension of the warrant expiration date was intended to conform the term of the warrants to that of the Restated Credit.

Amendment to Revolving Loan Facility with MidCap

On February 7, 2013, the Company entered into “Amendment No. 4 to Credit and Security Agreement and Limited Consent” (the “Revolving Loan Amendment”) with MidCap Funding IV, LLC and Silicon Valley Bank, as lenders (the “Lenders”), and MidCap Financial, LLC, as agent (the “Agent”).

The Revolving Loan Amendment amends the Credit and Security Agreement, dated as of August 30, 2010, as amended, to which the Company, the Lenders and the Agent are parties (the “ Revolving Loan Agreement”), to reflect the following changes:

· The maximum face amount of the Letter of Credit Liabilities permitted under the Revolving Loan Agreement was increased to $760,755.39, and the Lenders consented to the issuance of a Letter of Credit in the same amount by Wells Fargo Bank, National Association.

· The Commitment Expiry Date under the Revolving Loan Agreement was amended to allow for an extension from August 30, 2013 to January 31, 2014 at Agent’s and Lenders’ sole option, which option can be exercised at any time prior to March 31, 2013.

· The period during which the Prepayment Fee of 1% is applicable was extended from three years from the original closing date to the Commitment Expiry Date (if it is extended by the Agent and Lenders).

· The Agent and Lenders consented to the Company’s entry into the Amendment with the Silver Point Entities and the Restated Credit Agreement thereunder.