Almost a week after closing down its local operation, El Amal’s parent company, A+HC Holding Inc., filed for Chapter 11 bankruptcy protection, buckling to the island’s ongoing economic problems and the banking crisis they said compounded their operational problems.
This is the second time in as many years that the El Amal pharmacy chain turns to the U.S. Bankruptcy Court to address its issues, the first time being in March 2009, when it sought help to reorganize some $75 million it had in debt at the time. That filing was converted into a Chapter 7 liquidation, when former owner and founder Saleh Yassin sold the 22 stores still in operation to his sons.
This time, the Chapter 11 filing shows that the company is dragging nearly $30 million in debt, of which $24 million is owed to Banco Popular. Leading the list of unsecured creditors is Borschow Hospital and Medical Supplies, which is owed nearly $1.3 million in inventory purchases.
In the petition signed by A+HC President Mohammad Yassin, the owners included an additional document certifying El Amal board’s resolve to file for bankruptcy protection as “creditors … are threatening suit and have threatened to undertake steps to obtain possession of the corporation’s assets.”
That document was signed Feb. 17, the day before the pharmacy chain closed down abruptly after nearly 40 years in the market. It was also the day Banco Popular told El Amal its credit line had been depleted, so it had nothing with which to pay its nearly 350 employees.
“Given that situation, we had to face the difficult and bitter decision to cease operations,” according to a letter circulated Thursday.
Contrary to public perception that the company had shut down without warning, in the letter, El Amal’s management said the morning of the closing it had notified the Health Department, the U.S. Drug Enforcement Administration and the Mental Health and Anti-Addiction Services Administration, known as ASSMCA for its Spanish initials.
“Both ASSMCA and the DEA approved an action plan to be followed to comply with all of the laws and regulations that apply to narcotics and other controlled substances,” said the letter. “Over the next 48 hours, management spent all of its time and effort complying with such a plan.”
The company’s financial troubles are also reportedly directly linked to mounting unpaid prescriptions by insurance providers — estimated at between $1.5 million and $3 million — and heated competition by the likes of Walgreens and new arrival CVS Pharmacy.
On Thursday, Mohammad Yassin said the Chapter 11 filing was a step taken to buy time to sell the operation. In the weeks leading up to the closing, El Amal had reportedly been in talks with a local company that had been interested in picking up the chain, but was unable to do so after financing fell through on Feb. 14.
Upon closing, El Amal came under fire from local health officials who were flooded with complaints from patients whose access to prescription medications was cut off when stores closed. After meeting with Health Department officials on Tuesday, El Amal agreed to open its Piñero Ave. store for the next 30 days to dispense pending prescriptions.
“Our commitment with the people is to do everthing that is allowed by law to eliminate or minimize as much as possible the inconveniences that these unexpected circumstances have produced,” the letter concluded.
Industry sources close to the proceedings said El Amal will likely be unable to sell the operation and end up filing for Chapter 7 liquidation in the next 30 to 45 days, at which time a court-appointed trustee will be assigned to sell the company’s assets.
It is not clear, however, what will happen with the real estate housing the 22 El Amal stores remaining in the chain. It is said many of those stores are owned by Berwind Realty, property of El Amal founder Saleh Yassin.
Business reporter with 27 years of experience writing for weekly and daily newspapers, as well as trade publications in Puerto Rico. My list of former employers includes Caribbean Business, The San Juan Star, and the Puerto Rico Daily Sun, among others. My areas of expertise include telecommunications, technology, retail, agriculture, tourism, banking and most other segments of Puerto Rico’s economy.