The parent company of Aspen Dental, one of the largest dental chains in the United States, has dropped a sale plan it intended to use to repay debt. Aspen Group, jointly owned by three private equity firms, could not find a way to repay roughly KRW 4 trillion in loans coming due next year, and its lenders ultimately hired a law firm that specializes in corporate restructuring.
According to Bloomberg, Aspen Group notified its lenders in recent weeks that it would no longer pursue the sale of its urgent-care chain WellNow. The lenders have retained the US law firm Gibson, Dunn & Crutcher as an advisor and are discussing how to handle roughly $3 billion (about KRW 4 trillion) in loans maturing next year, the outlet reported.
Three Private Equity Owners and the Collapsed WellNow Sale
Aspen Group is owned by three private equity firms: Leonard Green & Partners, Ares Management, and American Securities. Besides Aspen Dental, the company also operates the implant-focused center chain ClearChoice, the urgent-care chain WellNow, the aesthetics chain Chapter Aesthetic Studio, and the veterinary chain Lovet Pet Healthcare. Lenders originally planned to sell WellNow for up to roughly KRW 400 billion ($300 million) and use the proceeds to repay debt. But that plan fell through in July, and the company's loan debt is now trading at around 90% of face value.
Falling Adjusted Operating Profit and a Largely Drawn Revolving Credit Line
Aspen Group's first-quarter adjusted operating profit was roughly KRW 136.5 billion ($101 million), down 6% from a year earlier and down as much as 23% from the previous quarter. Combined with loans drawn to fund new-location expansion, the company has already used KRW 472.5 billion of its KRW 607.5 billion revolving credit facility. In its most recent earnings release, the company said it also booked losses from patient bills it was unable to collect following a 2023 cyberattack.
Korea's One Dentist, One Clinic Law and Network Clinic Risks
This kind of situation is unlikely to unfold the same way in Korea. The Medical Service Act bars anyone who isn't a licensed medical professional from opening a clinic, and it also prohibits a single dentist from opening or operating more than one dental clinic, a rule known as the "one dentist, one clinic" law. As a result, the US-style structure, in which a private equity firm directly buys a dental chain through a leveraged buyout, cannot take root here. Instead, network dental clinics, which lend their name to multiple clinics in exchange for brand licensing fees and management support fees, fill that role. UD Dental, with 105 franchise locations, is the leading example. Last year, UD Dental received a qualified opinion in its external audit and has set aside more than KRW 21.3 billion in contingent liabilities on its financial statements in preparation for ongoing lawsuits. Its founder was also convicted of violating the one dentist, one clinic law.
There have been no reports so far that actual care at Aspen Dental or ClearChoice locations has changed. Still, concerns are emerging that if the parent company's financial troubles continue, investment in new locations and equipment replacement could be delayed, eventually affecting wait times and costs for patients. The same is true for UD Dental. The dentists who run franchise locations are separate business operators from headquarters, but if the parent company's lawsuits and accounting problems drag on, the fallout could spill over into franchise agreements and management support services. In short, when the name on a clinic and the company that actually manages its money are different, it's worth looking at that company's financial condition too.