Cleveland's Primary Health Systems last week received bankruptcy court approval for a fourth loan from its lenders in the form of debtor-in-possession financing.
The original loan agreement allowed PHS, which filed for bankruptcy in Delaware last March, to borrow $23.3 million from its lenders. It has since received four expansions to the line of credit. The amendments raise to $50 million the amount available to borrow.
Through Jan. 25, PHS had borrowed $43 million of that amount, said James Ricciardi, an attorney with Gibson, Dunn & Crutcher, a New York law firm representing the system.
PHS' lenders are First Union National Bank, Charlotte, N.C., and Key Corporate Capital, an affiliate of Cleveland's Key Bank.
For-profit PHS, headquartered in Wayne, Pa., owns three hospitals in Cleveland-212-bed Deaconess Hospital of Cleveland, 344-bed Mount Sinai Medical Center and 199-bed Saint Michael Hospital. The system also owns 98-bed PHS Mount Sinai Medical Center-East in Richmond Heights, Ohio.
PHS is expected to ask for an extension beyond the Feb. 15 deadline for filing its formal reorganization plan, Ricciardi said.
"It has taken us longer to build a consensus with the banks and the unsecured creditors committee toward a reorganization plan than we had expected and than we had anticipated," he said.
The system's turnaround plan calls for converting to not-for-profit status, scrapping teaching programs and building a community-based system around physicians (Sept. 20, 1999, p. 54).
When it filed for bankruptcy, PHS listed assets of $157 million and liabilities of $237 million.
It owes the unsecured creditors, not counting the two banks' unsecured claims, about $35 million, Ricciardi said.