Judge delays bankruptcy hearingPublished 12:09am Friday, July 4, 2014
NATCHEZ — The federal bankruptcy judge reviewing Natchez Regional Medical Center’s case passed Thursday on approving the county-owned hospital’s proposed sale process until later this month.
Judge Neil Olack, chief bankruptcy judge for the U.S. Southern District of Mississippi, continued the decision until 10:30 a.m. July 16 at the request of the hospital and its creditors.
The hospital’s bankruptcy attorney, Eileen Shaffer, said NRMC has been making payments and has been paying interest on its bond notes since the bankruptcy process started.
The hospital has formed a committee to represent its unsecured creditors and work with their attorneys to arrange payment of its debts.
Attorneys representing the committee asked the court to grant a continuance for the decision to approve the sale process between NRMC and Community Health Systems because the creditors did not understand all of the complexities of the proposed sale agreement and also had technical suggestions for the sale.
Shaffer said the hospital had no problem with the request for the agreement, saying it was “unfair and impossible” for the committee to fully understand all of the proposed asset purchase agreement in time for the court hearing after it was provided to them.
The committee had been given the proposed agreement in mid-June.
Olack said he wanted some clarity on how pre-paid taxes will function in the sales process.
The hospital, Adams County and the City of Natchez have structured an arrangement in the sales process in which CHS will pre-pay approximately $11 million in taxes in order for the county to pay off the hospital’s bond as part of the sale proposal.
CHS will also pay $10 million in cash at the time of the purchase.
The judge likewise said he wanted some clarification on how the breakup fee for the stalking horse bidder will be structured into the bidding process.
In the bidding process the county supervisors approved in June, 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.
The $1 million initial overbid requirement is to cover the cost of the stalking horse — the breakup fee. 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.
“We will have to hear from the stalking horse and see what they have done and how much time they have put into this,” he said.
“I will need to see some evidence that amount is justified.”
The judge instructed all parties to file their motions related to the July 16 hearing by July 11.
“I don’t want to show up here on July 16 and you show me a different bidding procedure and no one else has had time to review it,” he said.
“I want to know those changes well before the 16th and those people taking an interest in the case will, too.”
Olack said the July 16 hearing would be in Natchez because of the local interest.
Once the bidding process is approved by the court, 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.
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.