Quincy Medical Center is trying to meet a deadline for a proposed sale to a for-profit company, but the state Attorney General’s Office may need more time.
By Jack Encarnacao
Posted Jul 11, 2011 @ 05:54 AM
Last update Jul 11, 2011 @ 05:57 AM
QUINCY —
The state attorney general has filed a motion opposing an element of Quincy Medical Center’s proposed bankruptcy reorganization because the hospital’s plan might not give her office enough time to review the sale.
Under federal and state law, the transfer of a charitable nonprofit entity to a for-profit corporation needs the approval of the state attorney general. Quincy Medical is seeking such a transfer in a proposed $38 million sale to Steward Health Care System LLC.
Attorney General Martha Coakley filed the motion July 5 to ensure her office has enough time to review the transaction.
“Our filing details our role and responsibilities to review the sale of a nonprofit hospital to a for-profit entity under Massachusetts state laws, and requests that the court provide us enough time to complete this process,” Coakley spokesman Harry Pierre said.
Quincy Medical Center hopes to have its bankruptcy reorganization approved and the sale to Steward completed by October. Coakley’s motion reserves her right to take longer than that in her review of the deal. Coakley conducted a similar review last year of Steward’s deal to buy the Caritas Christi health care system.
Quincy Medical Center filed for Chapter 11 bankruptcy protection last week as part of the sale to Steward. The filing is intended to reduce the $56 million in bond debt the cash-strapped hospital carries, which Steward will not cover.
John Morrier, Quincy Medical Center’s bankruptcy lawyer, said the hospital hopes to get materials to Coakley’s office quickly so the Steward deal can stay on schedule.
“Quincy Medical Center respects the Attorney General’s Office and agrees that they have a statutory obligation to review the transaction,” Morrier said. “We’re hoping that by working cooperatively we can get them the information they need to evaluate the transaction and complete it in a timeframe that helps us preserve the sale.”
In this situation, time is money for the hospital.
Under the purchase agreement with Steward, either side can terminate the agreement if all proceedings – including bankruptcy reorganization and state approvals – aren’t completed by December.
The deal is also off if the Bankruptcy Court dismisses the case without approving a sale order to Steward. In a Chapter 11 bankruptcy case, the court must conduct an auction seeking higher bids for assets before approving a sale to the proposed buyer.
Under the sale agreement, Steward’s $38 million purchase price will drop to $37 million if the deal isn’t completed by Oct. 1 and to $35 million if the deal is completed after Nov. 1.
In addition to the purchase price, Steward has also agreed to make $34 million in upgrades to the hospital in its first five years of ownership.
In Bankruptcy Court, the hospital is seeking a way to resolve its debt by paying creditors less than they are owed.
On Wednesday, a bankruptcy judge gave interim approval to Quincy Medical Center’s request to use cash that is subject to bondholders’ liens to continue the regular operations of the hospital during bankruptcy proceedings.
“The bondholders are supportive of Quincy Medical Center continuing operations (and) supportive of both the need for the sale and the proposed sale we’ve presented to the court,” Morrier said.
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Jack Encarnacao is at jencarnacao@ledger.com.
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