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July 16, 2019 – The Debtors filed a motion requesting each of a bidding procedures order and a sales order. The bidding procedures order would (i) approve bidding procedures in respect of the sale(s) of subtantially all of the Debtors' assets (the "Sales") and (ii) approve procedures for selecting one or more stalking horses, including bidder protections to be offered. The sale order would authorize the Sales [Docket No. 205].
The Debtors' motion states, “From the outset of these cases, the Debtors and their professionals believed that SCH and its related physician practice groups were viable entities that could either be reorganized in connection with these Chapter 11 Cases or sold pursuant to a sale under Bankruptcy Code section 363. Indeed, even though certain of the STC Entities have faced the same or similar challenges as those that have troubled HUH, and despite drains on the STC Entities’ liquidity in an effort to support HUH’s losses, the operations of the STC Entities have remained stable since the Debtors’ acquisition of the business in January 2018. While the operations of the STC Entities remain stable at this time, the Debtors recognize that certain uncertainties and costs inherent in the bankruptcy process, as well as financial constrictions imposed by, inter alia, restrictive vendor terms and proposed debtor-in-possession financing and cash collateral budgets, could, over time, create challenges and/or disruptions in the STC Entities’ operations. Such disruptions, no matter how slight, are troublesome given the Debtors’ heightened focus on quality and continuity of care both at STC and at its related practice group facilities. Moreover, any such disruptions risk impairing the value of the STC Entities’ businesses, to the detriment of creditors and parties in interest in these cases.
To avoid any such risks of disruption to the STC Entities’ operations, it is necessary for the Debtors to act as quickly as possible to establish a process by which the STC Entities are sold to a highest and best bidder. To this end, the Debtors have filed the instant motion, pursuant to which the Debtors are proposing an expeditious bidding process that provides the Debtors with sufficient time to market the assets of the STC Entities while also balancing the need to move quickly to ensure smooth continuous operations and the achievement of maximum value for the Assets. In particular, the proposed procedures contemplate a closing on any Sale by October 4, 2019.”
The Debtors motion provides the following summary of its marketing efforts: “…in April 2019, the Debtors engaged EisnerAmper LLP to provide assistance in, inter alia, exploring various transaction alternatives, including restructuring and refinancing alternatives. The Debtors also engaged in intense, arms-length discussions with DUCOM regarding a potential transaction in which DUCOM would acquire STC, HUH and its hospital towers, for, in the case of HUH, nominal consideration, including the assumption of debt and certain other obligations.
These discussions were unsuccessful; in late May 2019, DUCOM informed the Debtors that it was not interested in acquiring HUH, stating 'we do not believe that HUH has any financial value.'
In early June, 2019, the Debtors retained SSG Advisors, LLC (“SSG”) to assist in pursuing a financing, sale or restructuring transaction. Immediately upon its retention, SSG focused its efforts on marketing HUH to potential strategic purchasers, developing marketing materials, including a “teaser” and a confidential information memorandum. SSG also established an electronic data room containing key information for parties to conduct in depth due diligence on HUH.
Although no parties expressed an interest in acquiring HUH as a going concern, SSG is cautiously optimistic based on preliminary discussions with 3 strategic buyers that a transaction that permits the ongoing operation of the STC Entities and maximizes the value of the STC Entities for the benefit of creditors and parties in interest can be obtained if the parties act quickly.
Objectives of the Chapter 11 Filings
In a declaration in support of the Chapter 11 filing (the “Wilen Declaration”) [Docket No. 2], Allen Wilen, the Debtors’ Chief Restructuring Officer, provided the following overview of the Debtors' objectives: "The Debtors’ cases include, among other entities, two major hospitals in Philadelphia, PA – St. Christopher’s Hospital for Children (‘STC’) and Hahnemann University Hospital (‘Hahnemann’ or ‘HUH’) – as well as a number of affiliated physician practice groups. Each of these entities is directly or indirectly owned by Philadelphia Academic Health System, LLC (‘PAHS’), one of the Debtors herein. The Debtors believe that STC and its related physician practices are viable and valuable entities that can be preserved and reorganized through a sale pursuant to section 363 of the Bankruptcy Code or a chapter 11 plan. That is not the case for HUH and its related physician practices, which the Debtors have concluded are not viable or saleable as a going concern. Given the bleak financial picture for HUH, the Debtors, prior to the Petition Date, issued WARN Act notices to HUH employees and began the process of shutting down HUH. The Debtors intend to use these chapter 11 cases to conduct an orderly closure and wind-down of HUH.
Proposed Key Dates:
- Bidding Procedures Hearing: July 26, 2019
- Stalking Horse Bid Deadline: August 23, 2019
- Sale Objection Deadline: September 13, 2019
- Bid Deadline: September 17, 2019
- Auction: September 19, 2019
- Deadline to Object to Sale to Successful Bidder: September 20, 2019
- Sale Hearing: September 23, 2019
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