Hospital bankruptcy hearing set for July 3Published 12:13am Wednesday, June 18, 2014
NATCHEZ — A hearing in bankruptcy court slated for July will be the next major step in selling Natchez Regional Medical Center, the hospital’s attorney says.
The county-owned hospital is in negotiations with Community Health Systems for its purchase.
A bankruptcy court judge will have a status conference July 3 in Natchez, hospital attorney Walter Brown said, during which the approval of the bid process for the sale will be addressed.
The bidding process would make CHS a stalking horse bidder, which means the price CHS negotiated with NRMC 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.
Brown said a judge would hear any objections to the motion of approving the bidding process before making a ruling.
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.
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.
Once the judge approves the bidding process, Brown said an asset purchase agreement could be finalized.
“(Adams County) and CHS would then sign that document and that really puts us into the next plateau of the process,” Brown said.
At that time, the Adams County Board of Supervisors can adopt the finalized sale resolution, 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.
Brown said another important step in the sale process — a step he originally believed was going to be handled this week — would be taken up later.
To facilitate the sale structure of the county-owned hospital to CHS, the supervisors applied to the Mississippi Development Authority for the sale to be considered a Regional Economic Development Act (REDA) project.
The move would allow CHS to prepay property taxes as part of the sales process. Those prepaid taxes would be part of an overall purchase price that would be sufficient to pay off the bankrupt hospital’s debt.
The REDA designation allows multiple municipalities to apply jointly to issue revenue bonds based on the anticipated future tax revenues of an economic development project, MDA spokesman Jeff Rent said.
The bond proceeds can be used to build or improve infrastructure needed for the project, and the taxes collected from the project are used to service the debt on the bonds.
Brown said last week he believed the board would vote on the matter this week, but later learned the board was no longer meeting this week.
The next board meeting is June 27, but an agenda has not been set.
“The REDA would still have to be approved for everything to happen, but it’s not important timeline wise as the bankruptcy hearing is,” Brown said. “If it wasn’t approved, you’d have to come up with some sort of alternative plan, but I’m reasonably confident it will be approved.”
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.