The underfunded pension liabilities are currently the subject of a lawsuit brought by nurses and other healthcare workers and backed by the Service Employees International Union-United Health Care Workers West, which opposes the Prime Healthcare takeover.
The union represents 2,700 workers across Daughters' six hospitals.
The California attorney general has 105 days to issue a ruling on the application, and the process is expected to be the longest of the three approvals that the deal requires, said Andrew Turnbull, an investment banker with Houlihan Lokey, Daughters' transaction advisor, on a call with bondholders. The deal also needs approval from the Vatican, as well as federal antitrust approval.
If Attorney General Kamala Harris signs off on the acquisition, the parties will then seek approval from the California Department of Public Health. On a typical timeline, the deal could close as early as the first quarter of 2015, Turnbull said.
Ontario, Calif.-based Prime, which has $2.3 billion in assets, has the necessary financing in place and cash on hand to complete the transaction, he added.
But the approval process could extend beyond the expected timeframe and is likely to encounter significant scrutiny, including pressure from the state's elected officials.
Rep. Mike Honda, whose district includes the South San Francisco Bay Area, said in a statement last month that he has written to Harris, “urging her thoughtful consideration of the impact on the quality and access to healthcare when she reviews the sale of the Daughters of Charity hospitals.”
The SEIU also is waging a hard-hitting campaign to block the transaction. After the bondholder call, it issued a news release to counter remarks from Daughters CEO Robert Issai, who categorized the system's relationship with the union as a “great labor-management partnership.”
The SEIU said the comment was misleading in light of employee opposition to the sale.
Both Turnbull and Issai addressed concerns about the union's opposition to the takeover on the investor call.
“We're looking to engage with them and incorporate them into the discussion,” Turnbull said, later adding, “I think all reasonable people will come to the conclusion that this is a fantastic result for the system, the community and all of its constituents.”
Issai added: “The momentum is on our side and we're going to go on the communications offensive.”
Follow Beth Kutscher on Twitter: @MHbkutscher
