Initially resisting several suitors, Logan (W.Va.) General Hospital has submitted its own proposal for dealing with its $65 million debt-by liquidating its nonhospital assets, taking advantage of forgiven state and federal tax penalties, and procuring $18 million worth of long-term loans to pay back creditors.
The hospital board submitted the reorganization plan to the U.S. Bankruptcy Court in Charleston, W.Va., on June 18. The court will set a hearing date to determine whether the hospital's disclosure statement is adequate. If so, creditors will have an opportunity to vote on the plan.
At least one creditor has already voiced some skepticism about the hospital's ability to live up to promises set out in the reorganization plan.
The 132-bed not-for-profit hospital began missing payments on a $31.4 million bond issue in January 1998. Last October it filed for Chapter 11 bankruptcy protection (Oct. 26, 1998, p. 30). Since then, several for-profit hospital chains have made offers to buy the hospital, including Community Health Systems, Nashville; Health Management Associates, Naples, Fla.; and Province Healthcare, Brentwood, Tenn. (June 7, p. 18).
But Ted Hatfield, president and chief executive officer of not-for-profit Monterra Health System, which owns the hospital, said the hospital board and the community are adamant about not selling the hospital to a for-profit company.
"It's going to remain just like it is- a community not-for-profit-because we believe that it's the best for the community and for healthcare in southern West Virginia to remain not-for-profit," he said.
Both federal and state tax collectors have forgiven the hospital penalties on late tax payments, to the tune of $2.7 million, according to a summary of the reorganization plan.
The hospital corporation is in the process of selling a shopping mall it owns to a local company called Fountainplace, managed by Everett Hannah, who operates a nearby lumber business, said W. Bradley Sorrells, the attorney representing the hospital.
Because the hospital expects to get $34.6 million for the mall, not the $37.5 million benchmark price it had set, the hospital has proposed obtaining $18 million in loans from local banks as part of its plan. It proposed to get $15 million in bank loans before the mall sale.
Ellen Cappellanti, attorney for the Bank of New York, which is trustee for the bond issue, said she is skeptical of some of the hospital's promises and would prefer to see the bonds paid off now rather than later, either through the sale of the hospital or a refunding of the bond issue.
"We have serious questions about their ability to perform in the long run as they project in the plan," she said. "I think the majority of the bondholders would like to have the bonds paid."