Seven bidders stepped forward for the shuttered Pine Grove Hospital in Los Angeles, one of five hospitals owned by bankrupt Doctors Community Healthcare Corp. and the first to be formally put on the block.
The firm's investment banker, Tom Barry of Cain Bros., New York, said the other four Doctors Community hospitals, which are operating, will go through a similar sale process, but he declined to offer a timeline. The Scottsdale, Ariz., company declared bankruptcy last November, two days after a bankruptcy filing by its primary lender, National Century Financial Enterprises, Dublin, Ohio.
Its other hospitals are Greater Southeast Community Hospital, Washington; Hadley Memorial Hospital, Washington; Michael Reese Hospital, Chicago; and Pacifica Hospital of the Valley, Los Angeles.
Meanwhile, Doctors Community is negotiating with National Century, which is one of its creditors, over terms of proposed debtor-in-possession financing, which would help the hospitals continue to operate during the bankruptcy. The proposed $35 million one-year credit facility from Merrill Lynch & Co. calls for Doctors Community to pay at least $687,500 in fees with an adjustable interest rate that would start at around 5.8%. Since Merrill Lynch's claim on company assets would supersede the claims of existing creditors, National Century wants to cap the financing at $20 million and impose other limits, such as tying the financing to a timetable for selling the hospitals.
A hearing was postponed until this week to work out differences, according to lawyers involved in the case.
A court document filed by Doctors Community said an earlier $46 million financing deal with GE Capital fell through in recent weeks because of changes in the company's financial situation, including losses from a contract to provide services to the uninsured in Washington and a preliminary accreditation denial at Greater Southeast.
Barry said an offer for Pine Grove would be selected and submitted to U.S. Bankruptcy Court in Washington within a few days. Then, the court could hold an auction to attract more bidders. Barry said he expects to complete a sale by June 15.
Barry declined to reveal details of the initial offers for the hospital. "We're very pleased with where things are going in terms of the number and quality of bidders," he said.
Pine Grove, a 24-bed psychiatric hospital, shut its doors April 18, Administrator Larry McFarland told Modern Healthcare. According to court records submitted by Doctors Community, Pine Grove incurred a 50% drop in its census earlier this year after Los Angeles County rescinded its certification to provide psychiatric services to adolescents.