Huge Private-Equity-Owned Aspen Dental Secured Millions in PPP Loans Meant for Small Businesses

Data released by the US Small Business Administration on its Paycheck Protection Program (PPP) reveals that large private equity-owned dental services company Aspen Dental Management received PPP loans. The PPP program was created to provide relief to small businesses facing challenges posed by the COVID-19 pandemic.[i]

Aspen Dental is owned by private equity firms Leonard Green, Ares Capital and American Securities, as well as management and dentists.[ii] The three private equity firms’ were not lacking for money to support the dental firm when the pandemic hit – between them they have $31.27 billion in capital waiting to be invested.[iii]

Private equity-owned firms are generally prohibited from receiving SBA loans, though some private equity portfolio companies have been able to access the loans.[iv] For example, Aspen Dental managed to get approved for PPP small business loans despite being the second largest dental services company in the US, serving 815 affiliated dental offices across 41 states.[v]

According to data released by the SBA, Aspen Dental facilities received between $8.85 million and $21.35 million in PPP loans meant to intended to prop up small businesses.[vi]

Source: Good Jobs First COVID Stimulus Watch

State laws prevent private equity firms from owning dental practices outright in order to keep firms from getting involved in clinical operations. Companies like Aspen circumvent those laws by providing business and administrative support services to dentist practices. Aspen’s corporate structure may have allowed its facilities to access the PPP loans.[vii]

According to Bloomberg, almost all Aspen Dental locations qualified for PPP loans and all of the loan applications Aspen providers submitted were accepted.[viii]

Aspen’s ability to access PPP loans meant to help small businesses raises questions for lawmakers about how CARES Act assistance is distributed and what kinds of businesses should be eligible, especially when firms such as Aspen Dental are backed by deep-pocketed private equity firms.

Aspen’s Troubling Track Record

Aspen Dental has previously made headlines for engaging in a range of practices that hurt patients. State regulators have cracked down on Aspen repeatedly; over the last decade the company has paid at least $1.7 million in settlements with state attorneys general in Pennsylvania, Massachusetts, New York, and Indiana.[ix]

Complaints against Aspen range from poor quality of care, billing practices, misleading advertising, upselling of medical services and products the consumers felt were unnecessary, and unclear or incomplete terms for the financing of dental care.[x]

The New York Attorney General’s office found that Aspen incentivized and pressured staff to increase sales of dental services and products and implemented revenue-oriented patient scheduling systems.[xi] The Massachusetts Attorney General alleged that Aspen advertised that some services were free when they were not and refused to provide patients refunds for services not performed.[xii]

Dividends

Aspen dental has paid over $212 million in dividends to its owners in the last eight years: in February 2012 it paid $127 million and in April 2018 it paid $85 million.[xiii] Aspen appears to have paid another dividend as recently as February 2020 of an unknown amount.[xiv]

Endnotes

[i]https://www.sba.gov/about-sba/sba-newsroom/press-releases-media-advisories/sba-and-treasury-announce-release-paycheck-protection-program-loan-data

[ii]https://www.moodys.com/research/Moodys-changes-ADMI-Corps-outlook-to-negative-affirms-B2-CFR–PR_420927

[iii] Leonard Green & Partners: $15.97 billion; Ares Capital Management: $8.99 billion; American Securities: $6.31 billion. Data compiled from Pitchbook, accessed July 28, 2020.

[iv]https://www.cnbc.com/2020/04/24/us-says-hedge-funds-private-equity-are-not-eligible-for-small-business-relief-loans.html

[v]https://www.moodys.com/research/Moodys-changes-ADMI-Corps-outlook-to-negative-affirms-B2-CFR–PR_420927

[vi] Data retrieved from COVID Stimulus Watch database by Good Jobs First, accessed July 27, 2020: https://data.covidstimuluswatch.org/prog.php?agency_sum=&program_sum=&parent=&major_industry_sum=&hq_id_sum=&fedsum=&company_op=allwords&company=aspen+dental&agency%5B%5D=&program%5B%5D=&naics%5B%5D=&major_industry%5B%5D=&hq_id=&accountability=&free_text=&subsidy_op=%3E&subsidy=&face_loan_op=%3E&face_loan=&ownership%5B%5D=&cd%5B%5D=&subsidy_type%5B%5D=&employees_op=%3E&employees=&state=&city=

[vii]https://www.washingtonpost.com/business/on-small-business/private-equitys-backdoor-path-to-ppp-cash-revealed-in-data-dump/2020/07/09/3b256832-c1f2-11ea-8908-68a2b9eae9e0_story.html

[viii]https://news.bloomberglaw.com/banking-law/private-equity-on-edge-with-u-s-plan-to-name-relief-recipients

[ix]https://www.pecloserlook.org/wp-content/uploads/AspenDentalReport-1.pdf

[x]https://ag.ny.gov/press-release/2015/ag-schneiderman-announces-settlement-aspen-dental-management-bars-company-making

[xi]https://ag.ny.gov/press-release/2015/ag-schneiderman-announces-settlement-aspen-dental-management-bars-company-making

[xii]https://legalnewsline.com/stories/510450819-aspen-dental-to-pay-1-million-settlement-for-alleged-false-advertising

[xiii]https://www.moodys.com/research/Moodys-rates-Aspen-Dentals-amended-credit-facility-B2-CFR-affirmed–PR_237938; https://www.moodys.com/research/Moodys-affirms-ADMIs-B2-CFR-assigns-B2-to-the-proposed–PR_381690

[xiv] Pitchbook, accessed July 27, 2020.