Delaware Valley Medical Center, one of suburban Philadelphia's few remaining independent hospitals, filed for bankruptcy reorganization last week in a prelude to a sale.
Pending approval by the U.S. Bankruptcy Court in Philadelphia, 151-bed Delaware Valley will sell its Langhorne, Pa.-based facility and equipment to Philadelphia's Frankford Hospital for $18 million in cash, plus a loan of up to $5 million in interim financing. Frankford, which operates 352 beds at two campuses in Philadelphia, will forgive up to $3 million of the loan. It also agreed to invest $9 million in capital equipment.
The Chapter 11 filing helps clean up Delaware Valley's balance sheet. With $25 million of long-term bond debt and another $6 million to $7 million in unsecured debt, "Delaware Valley has more debt than it is worth," explained Robert Lapowsky, a partner with Stevens & Lee, the Philadelphia law firm that is representing Frankford.
Delaware Valley is also losing money on operations. Unaudited financials for 1998 show a loss of $5.3 million on revenues of $44.8 million.
Frankford, by contrast, ended fiscal 1998 with net income of $21.9 million on revenues of $195 million.
Frankford executives say they'll retain Delaware Valley as an acute-care hospital. "It's a natural to relieve some of the pressure at our Torresdale campus," which has been operating at full capacity over the past 18 months, said Kevin Connor, Frankford's senior vice president and chief financial officer.