Eighteen months after it filed for Chapter 11 bankruptcy protection, Crouse Hospital, Syracuse, N.Y., has a reorganization plan that would fully reimburse its secured creditors 100% but offer as little as 15 cents on the dollar to other creditors.
Crouse Hospital filed its long-awaited plan in U.S. Bankruptcy Court, Utica, N.Y., on Friday, entering a final phase in a reorganization that officials hope can be wrapped up by year-end. The 418-bed hospital filed for bankruptcy protection in February 2001, seeking breathing room from approximately $91 million in debt.
The plan to make whole its bankers -- the secured creditors -- carries a hitch. Hospital officials want a five-year deferral on the principal in order to fund some necessary capital expenditures, including upgrading the hospital's operating rooms and intensive-care unit, said Robert Allen, a hospital spokesman.
In total, Crouse needs some $67 million over the next five years for capital improvements. The hospital intends to come up with $43 million of that on its own, but it will need an additional $24 million in new debt to make a go of the plan, hospital CEO David Speltz said in a written statement.
"Whether or not they can get new debt depends on how much they are willing to pay. The expectation is that new debt will be speculative or unrated, and it will be expensive debt," said Liz Sweeney, a director in healthcare ratings at Standard & Poor's.
Meanwhile, the unsecured creditors -- primarily vendors and other suppliers -- will divide a total payment of $3 million, the equivalent of 15 cents on the dollar, Allen said. The payment could possibly grow to $5 million.
Crouse will look much the same after it emerges from bankruptcy, with no changes in programs or services and no big job cuts, Allen said. Nonstrategic real estate assets, such as a parking garage, will be sold.
Though July 31 of this year, Crouse lost $5 million on $121.8 million in revenue, including a $2.4 million restructuring charge, Sweeney said. Patient volume dropped off after the bankruptcy filing but stabilized during the second quarter of this year, Speltz said in the memo. The third quarter shows further improvement, he added.
Bankruptcy law requires the hospital to still go through a disclosure hearing and a confirmation hearing, during which the judge will set a bankruptcy exit date, officials said. The hearings likely will occur within the next three months.