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Judge accepts HMC plan


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POSTED: Tuesday, June 23, 2009

Federal bankruptcy Judge Robert Faris accepted Hawaii Medical Center LLC's disclosure statement yesterday over the objections of creditors, effectively blocking other parties from submitting reorganization plans.

               

     

 

KEY ELEMENTS OF REORGANIZATION:

» Convert HMC-East in Liliha into a not-for-profit, while HMC-West in Ewa would remain a for-profit company

       

» Restructure its payment schedule on the more than $80 million that it owes creditors and lenders

       

» Pay 70 cents on the dollar for about $20 million owned to certain creditors over four years

       

» Repay $3.9 million in secured claims to Siemens Finance over one year

       

» Seek a reduction in the amount owed to St. Francis Healthcare System

       

» Secure exit plan financing

       

St. Francis Healthcare System of Hawaii, one of HMC's creditors, filed an objection Friday to the bankrupt company's disclosure statement and asked the court to allow other parties to submit reorganization plans. However, early in yesterday's hearing, Faris said he was inclined to approve HMC's disclosure statement, which provides the financial condition of the company and an analysis of the plan's feasibility.

“;My thought is that it makes more sense to let the process go forward rather than to stop it at this point,”; Faris said.

Although St. Francis had argued that HMC's reorganization plan withheld pertinent information from creditors, Faris called the disclosure statement “;adequate.”; Other objections to the proposed plan could be consider at a future hearing, Faris said.

Yesterday's court approval enables HMC to move ahead with its reorganization plan, which was filed on March 30. A hearing has been set for Aug. 3 to schedule a date for confirmation of the reorganization plan.

“;We were surprised that the judge approved the disclosure statement over so many objections and in light of his expressed concern that the plan from HMC presents difficulties for ultimate confirmation,”; said Sister Agnelle Ching, St. Francis Healthcare System chief executive officer.

The relationship between St. Francis and HMC, comprised of the Wichita-based Cardiovascular Hospitals of America and a local physicians group, has been tumultuous for some time. HMC acquired St. Francis Medical Center in 2007 and began the process of converting its two not-for-profit hospitals into for-profit facilities. Discord has been rising steadily since HMC filed bankruptcy in 2008 and suspended payment to creditors. In addition, HMC is disputing the value of HMC-East and HMC-West and is seeking court assistance in determining the amount owed to St. Francis.

Although the disclosure statement was approved, the court suspended ruling until HMC resolves the St. Francis claim, Ching said.

“;This bankruptcy creates a strain on St. Francis, the physicians and the community,”; she said. “;We will continue to work with all parties to bring this bankruptcy to a mutually beneficial conclusion.”;

In the coming weeks, HMC will be working with its secured and unsecured creditors — St. Francis among them — to fine-tune its reorganization plan, said Salim Hasham, chief operations and restructuring officer for Hawaii Medical Center.

The court's decision to approve HMC's disclosure statement “;affirms that our reorganization plan has merit and that we are on track to emerge from bankruptcy,”; Hasham said.

Confirmation of HMC's reorganization plan could take anywhere from 60 to 90 days with Oct. 1 as the target date for exiting Chapter 11, Hasham said.