That’s not a particularly informed comment if you understand how...

That’s not a particularly informed comment if you understand how a FASA Facilities and Adminstration Services Agreement actually works in a Dental Practice.  The reality is that Smiles has just a $1m in the bank and working capital facility that’s under threat.  If they can’t be cashflow positive it’s over.  Right now there’s a high likelihood that anyone supplying them is going to want cash upfront in case they do go into administration.

The dentists might get their revenue first for a procedure but if Smiles has no cash they can’t pay the receptionist to answer the phones or make bookings, can’t pay the nurse to assist the dentist and sterilise the instruments, can’t pay the practice manager to order product and manage staff and rosters, can’t pay the suppliers for dental products and consumables or crowns, can’t pay the rent on the premises, can’t pay the IT and comms charges to have practice management systems to record, send out recalls via SMS and email or the HiCaps terminal fees to bill the Medical Funds then it is going to grind to a halt awfully quickly.
 
SIL is no position to buy back anyone’s phantom equity (let’s be clear it’s not actually part ownership at all, it’s a right to a share of earnings there’s not title or charge over practice assets to the vendor) and there is no one who’s going to buy the existing phantom equity off the vendors with such uncertainty about SIL as a going concern.  

If they do get a waiver on the covenant with the bank, the bank will be protecting their interest only.  And if it tips then those phantom equity profit shares are toast - any buyer talking to a receiver would be wanting to grab the practice, secure the patient list and then in all likelihood be in a box seat to dictate terms to the clinicians.