County adopts bidding process for eventual sale of hospitalPublished 12:12am Tuesday, June 3, 2014
NATCHEZ — The Adams County Board of Supervisors adopted Monday a bidding process for the eventual sale of Natchez Regional Medical Center.
The county-owned hospital is in negotiations with Community Health Systems for its purchase. When NRMC and CHS come to consensus on the plan, CHS will be considered a stalking horse bidder, which means the price CHS negotiated will be the bottom bid when the hospital is placed on the market for auction.
If no one outbids the stalking horse, the sale will automatically — and bindingly — go to CHS.
In the bidding process approved Monday, a qualified bidder would have to outbid CHS by at least $1 million, and every subsequent bid would have to outbid the previous bid by $100,000, Board Attorney Scott Slover said.
The $1 million initial overbid requirement is to cover the cost of the stalking horse, Slover said.
In stalking horse agreements, the stalking horse bidder has a built-in financial incentive in case they are outbid because of the presumed risk they are taking on by being the stalking horse.
Under the rules adopted Monday, qualified bidders will have to be able to demonstrate they can take on the business of operating a hospital and have the capital to bring the NRMC facility up to standard and potentially replace it in the long run, Slover said.
While CHS has signed a letter of intent with NRMC for a base price of $10 million and an upfront payment of $8 million in taxes, the agreement has not been finalized.
Slover said the reason for adopting the bidding process Monday was because it would require approval of the federal bankruptcy court.
NRMC officials announced the hospital would have to file bankruptcy in February, stating at the time the hospital had $3 million more in financial liabilities than assets.
The bankruptcy was filed in late March.
Slover said once the bidding process is filed with the bankruptcy court, creditors have 21 days to object, which he said was unlikely.
Once the bidding process is approved, the board can adopt the finalized sale resolution — assuming at that time the asset purchase agreement has been completed — and the sale process can begin with an advertisement for bids.
Once the notice advertising the sale is published, county residents have the option of filing a petition asking to take the sale to a voter referendum for approval. The petition would require 1,500 signatures to take the matter to a vote.
If a successful petition is not filed, the hospital can go to sale without further objection.
After 30 days, NRMC will go up for auction, and if no one outbids the negotiated agreement, the sale will automatically close with CHS. Even if someone submits a higher bid than CHS’ negotiated base price, the company can submit a new, higher bid to remain competitive in the auction.
NRMC opened in 1960 as Jefferson Davis Memorial Hospital. Its $2.4 million construction was underwritten by an $800,000 local contribution and state and federal funds.
It has been financially independent since 1974 and does not receive tax support, but is backed by a 5-mill standby tax that the Mississippi Development Bank required the hospital to get in 2006 when it asked for the MDB to reissue its revenue bond.
The county supervisors appoint the hospital’s volunteer trustees.