ATIP ATI Physical Therapy Inc

CUSIP No. 00216W208

CUSIP No. 00216W208

CUSIP No. 00216W208

CUSIP No. 00216W208

CUSIP No. 00216W208

CUSIP No. 00216W208

Explanatory Note

This Amendment No. 4 (“Amendment No. 4”) amends and supplements the statement on Schedule 13D filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2022, as amended by Amendment No. 1 filed with the SEC on September 28, 2022, Amendment No. 2 filed with the SEC on October 20, 2022, Amendment No. 3 filed with the SEC on April 21, 2023 (as amended, the “Schedule 13D”), with respect to the Class A Common Stock, par value $0.0001 per share (the “Shares”) of ATI Physical Therapy, Inc., a Delaware corporation (the “Issuer” or the “Company”). Capitalized terms used herein and not otherwise defined in this Amendment No. 4 have the meanings set forth in the Schedule 13D.

This Amendment No. 4 amends the Schedule 13D as specifically set forth herein.

Item 2. Identity and Background

Item 2 of the Schedule 13D is amended and restated in its entirety as follows:

Each of the Knighthead Funds and Knighthead is sometimes referred to herein individually as a “Reporting Person” and collectively as the “Reporting Persons.” Information with respect to each of the Reporting Persons is given solely by such Reporting Person, and no Reporting Person assumes responsibility for the accuracy or completeness of information by another Reporting Person. A Joint Filing Agreement among the Reporting Persons is attached hereto as Exhibit 1.

This Schedule 13D relates to the Shares, Series I Warrants, Series II Warrants and Notes held of record by the Knighthead Funds. Knighthead, pursuant to certain investment management agreements serves as the investment manager of KHMF, KHDOF and KHSU and pursuant to certain investment advisory agreements serves as the investment advisor to KHNY and KHAL. Investment decisions with respect to the Shares held by the Knighthead Funds are made by Knighthead in its sole discretion.

Item 5. Interest in Securities of the Issuer.

Item 5 of the Schedule 13D is amended and restated in its entirety as follows:

(a)—(b) The information relating to the beneficial ownership of the Shares by each of the Reporting Persons set forth in Rows 7 through 13 on each of the cover pages hereto is incorporated by reference herein and is as of the date hereof. Such information is based on 4,169,911 shares of Class A Common Stock issued and outstanding as of April 17, 2023, as reported by the Issuer in its Current Report on Form 8-K, filed on June 13, 2023 (as adjusted for the Reverse Stock Split).

By virtue of the relationship among the Reporting Persons described in Item 2, each such Reporting Person may be deemed to share the power to vote or direct the vote and to share the power to dispose of or direct the disposition of the Shares as set forth in rows 7 through 13 of the cover pages of this Statement. The filing of this Statement shall not be construed as an admission that any such Reporting Person, Mr. O’Hara, Mr. Wagner or Mr. Cohen is, for the purpose of Section 13(d) or 13(g) of the Exchange Act, the beneficial owner of any securities covered by this Statement.

As a result of the agreements made pursuant to the A&R TSA (as defined and described in Item 6 of this Schedule 13D), the Reporting Persons may be deemed to constitute a “group” within the meaning of Section 13(d)(3) of Exchange Act. This Schedule 13D shall not be construed as an admission by the Reporting Persons that the Reporting Persons are, for the purposes of Section 13(d) of the Exchange Act, the beneficial owners of any shares of Class A Common Stock covered by the agreements made pursuant to the TSA unless otherwise expressly stated herein.

(c) Except as otherwise set forth in this Statement, none of the Reporting Persons has effected any transactions in the Class A Common Stock during the past 60 days.

(d) Except as stated within this Item 5, to the knowledge of the Reporting Persons, only the Reporting Persons have the right to receive or the power to direct the receipt of dividends from, or proceeds from the sale of, the Class A Common Stock of the Issuer reported by this Schedule 13D.

(e) Inapplicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

Item 6 of the Schedule 13D is hereby amended and supplemented as follows:

As previously described in Amendment No. 3 to the Schedule 13D, on June 15, 2023 (the “Closing Date”), the Company completed a transaction (the “Transaction”) to enhance the Company’s liquidity, and as approved by the Company’s stockholders at the Company’s annual meeting of stockholders held on June 13, 2023.

On the Closing Date, certain previously executed agreements became effective, including (i) Amendment No. 2 to Credit Agreement (the “Credit Agreement Amendment”), by, among others, ATI Holdings Acquisition, Inc., as borrower (“Opco”), Wilco Intermediate Holdings, Inc. (“Holdings”), Barclays Bank PLC, as administrative agent and issuing bank (the “Administrative Agent”), and the lenders party thereto (including certain of the Knighthead Funds), which amends that certain Credit Agreement, dated as of February 24, 2022 (the “2022 Credit Agreement” and together with the Credit Agreement Amendment, the “Credit Agreement”), by, among others, Opco, Holdings, the Administrative Agent and the lenders party thereto (including certain of the Knighthead Funds), (ii) a Second Lien Note Purchase Agreement (the “Original Note Purchase Agreement”), by, among others, the Company, Wilco Holdco, Inc. (“Wilco”), Holdings, Opco, the purchasers from time to time party thereto (the “Purchasers”) and Wilmington Savings Fund Society, FSB, as purchaser representative (the “Purchaser Representative”) and (iii) certain other definitive agreements relating to the Transaction (such documents referred to collectively as the “Signing Date Definitive Documents”).

In addition, on the Closing Date, the Company entered into or filed with the Secretary of State of the State of Delaware, as applicable, certain other agreements (collectively, the “Closing Date Definitive Documents”) to implement certain terms of the previously described Amended and Restated Transaction Support Agreement (the “A&R TSA”), dated as of April 17, 2023, by and among the Company and certain of the Company’s affiliates, certain of its first lien lenders under the 2022 Credit Agreement (including certain of the Knighthead Funds), the Administrative Agent, holders of its Series A Senior Preferred Stock (the “Preferred Equityholders”, which includes certain of the Knighthead Funds) and holders of the Shares. The Closing Date Definitive Documents include (i) the First Amendment to Note Purchase Agreement (together with the Original Note Purchase Agreement, the “Note Purchase Agreement”), dated as of the Closing Date, by and among the Company, Wilco, Holdings, Opco, the Purchasers party thereto (in such capacity, the “First Amendment Purchasers”, including certain of the Knighthead Funds) and the Purchaser Representative, pursuant to which the First Amendment Purchasers agreed to purchase, and the Company agreed to issue, an additional $3,243,302.02 aggregate principal amount of Notes (including $1,645,725.55 to certain of the Knighthead Funds), (ii) the Consent to Amendment No. 2 to Credit Agreement, dated as of the Closing Date, by, among others, Opco, Holdings, the lenders party thereto and the Administrative Agent, which amends the Credit Agreement Amendment, (iii) the First Amended and Restated Certificate of Designation of Series A Senior Preferred Stock of the Company, dated as of June 15, 2023 (the “A&R Series A COD”), which, as agreed under the A&R TSA, (A) revised the Preferred Equityholders’ preexisting rights to designate and elect one director to the Company’s board of directors (the “Board”) to provide that the Preferred Equityholders have the right to appoint three additional directors to the Board (resulting in the right of the Preferred Equityholders to appoint a total of four directors to the Board) until such time after the Closing Date that the Lead Purchaser (in each case, as defined in certain of the transaction agreements entered into in connection with the original issuance of the Series A Senior Preferred Stock) ceases to hold at least 50.1% of the Series A Preferred Senior Stock held by it as of the Closing Date, and (B) removed the provision that eliminated the Preferred Equityholders’ director designation rights upon the Company’s achievement of certain amounts of EBITDA; (iv) the First Amendment to that certain Investors’ Rights Agreement (as amended, the “Investors’ Rights Agreement”), dated as of February 24, 2022, by and among the Company and the Preferred Equityholders listed therein, which made changes similar to those under the A&R Series A COD and further provided that (A) all designee directors of the Preferred Equityholders will be subject to consideration by the Board (acting in good faith and consistent with their review of other Board candidates) and (B) at least one director appointed in accordance with the A&R Series A COD be unaffiliated with (and independent of) the Preferred Equityholders and meet the definition of “independent” under the listing standards of the New York Stock Exchange, and by the Securities and Exchange Commission; (v) the Certificate of Designation of Series B Preferred Stock of the Company, dated as of June 15, 2023 (the “Series B COD”), which Series B Preferred Stock is further described below, (vi) the Registration Rights Agreement, dated as of June 15, 2023, by and among the Company and the Purchasers with respect to the resale of shares of Common Stock into which the Notes are convertible; and (vii) such other related documents and ancillary agreements required to implement the Transaction.

Issuance of New Second Lien PIK Convertible Notes and Series B Preferred Stock

On the Closing Date, pursuant to the Note Purchase Agreement and the other Signing Date Definitive Documents, the Company (i) exchanged $100.0 million of the aggregate principal amount of the term loans under the 2022 Credit Agreement held by certain of the Preferred Equityholders for $100.0 million aggregate principal amount of a new stapled security, comprised of (A) Notes and (B) shares of Series B Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), which provide the holder thereof with voting rights such that the holders thereof have the right to vote on corporate matters on an as-converted basis as if the conversion occurred at an initial price per share equal to $12.87, and (ii) issued to the First Amendment Purchasers, and the First Amendment Purchasers purchased from the Company, an aggregate principal amount of $3,243,302.02 million in Notes and shares of stapled Series B Preferred Stock.

Holders of the Notes will also receive additional Notes upon the in-kind payment of interest on any outstanding Notes. The Notes are convertible into shares of Common Stock at a fixed conversion price of $12.50 (which reflects the Reverse Stock Split), subject to adjustment.

Appointment of a Director

Effective as of the Closing Date, pursuant to the terms of the Investors’ Rights Agreement and as approved by the Board, Andrew Shannahan (an affiliate of Knighthead) was appointed to the Board to serve as an independent director with a term expiring at the Company’s 2024 annual meeting of stockholders.

This discussion of the Transaction does not purport to be complete and is qualified in its entirety by reference to the Signing Date Definitive Documents, which are further described in and certain of which are filed as exhibits to, Amendment No. 3 to the Schedule 13D, and the Closing Date Definitive Documents, which are filed as exhibits to this Amendment No. 4 and incorporated herein by reference.

Item 7. Material to be Filed as Exhibits

SIGNATURES

After reasonable inquiry and to the best of each of the undersigned’s knowledge and belief, each of the undersigned certify that the information set forth in this statement is true, complete and correct.

Date: June 20, 2023