By Nathan Hale
Law360 (May 14, 2018, 9:02 PM EDT) — A Florida bankruptcy judge on Monday gave parties in the Chapter 11 case of a shuttered Miami hospital an extra week to iron out some issues before she weighs approval of bidding procedures and other issues surrounding its planned sale.
The official committee of unsecured creditors in the bankruptcy of Miami International Medical Center LLC, which operated as The Miami Medical Center, has raised concerns that the proposed bid procedures and a proposed stalking horse asset purchase agreement “rush to unduly favor” Variety Children’s Hospital, which is not only the stalking horse bidder but also an “insider” as an affiliate of the debtor. And on Monday, creditors committee counsel Robert P. Charbonneau of Agentis PLLC said that a potential adversary case would add some as yet unpublicized objections.
But Charbonneau also told the court that negotiations progressed over the weekend and he was optimistic that, given a few extra days, the parties would return next week “in harmony.”
U.S. Bankruptcy Judge Laurel M. Isicoff agreed to a midday Friday filing deadline and another Monday hearing but warned that the process needs to move forward and that Charbonneau should either be “singing and dancing around the lectern” or prepared to argue his objections when the hearing resumes.
“I believe we have a settlement in principle that needs to have some details ironed out between now and Friday and we’ll be prepared to present that settlement to the court on Monday,” he told Law360.
VCH, which owns and operates Nicklaus Children’s Hospital, has received additional scrutiny because it has put itself in a somewhat unusual insider posture, Charbonneau said. Not only is VCH affiliated with the debtor, but it also has become the hospital’s landlord after acquiring the underlying property and holds $27.4 million of the debtor’s secured debt after acquiring the outstanding interest in a $40 million loan and then issuing a nearly $3.4 million debtor-in-possession credit agreement.
“The additional scrutiny and their openness to the discussions has led us to what I think will be a pretty favorable settlement when it is revealed,” Charbonneau said.
The hospital, at 5959 NW Seventh St. in Miami, just south of Miami International Airport, was originally founded in 1963 by Cuban exile doctors as Pan American Hospital. It later became Metropolitan Hospital of Miami, under a Puerto Rico-based company, but shut its doors abruptly in 2014. HC 5959 NW 7th Street LLC acquired the property in April 2014 for just under $47 million and leased it to Miami International Medical Center for about $970,000 a month, according to court records and county property records. VCH was also a limited guarantor of the lease.
Miami International Medical Center renovated the hospital from a 150-bed facility into a highend facility with just 67 rooms, offering concierge medical services. It entered into a $40 million loan agreement with MidFirst Bank. VCH was also a limited guarantor before later obtaining the debt itself.
The Miami Medical Center struggled to attract a sufficient volume of patients to make ends meet, and it stopped taking new patients and asked for its state license to be suspended in October. The outstanding balance on the loan is more than $26.2 million, court records said.
Under the proposed bidding process, VCH would enter a roughly $30 million stalking horse bid covering the outstanding loan and the debtor-in-possession loan. Other bidders would have to meet an overbid requirement equal to at least VCH’s credit bid amount plus $150,000 and additional fees, according to the debtor’s motion for approval of the bidding procedures.
“The debtor believes that the bidding procedures will promote active bidding from any seriously interested parties that may exist and will dispel any doubt as to the best and highest offer reasonably available for the assets,” Miami International Medical Center said in its motion.
The motion notes that pre-bankruptcy marketing efforts drew interest from numerous health care companies, including 12 that provided written interest and conducted due diligence.
Counsel for the debtor and VCH did not immediately respond to requests for comment late Monday.
Miami International Medical Center is represented by Daniel N. Gonzalez and Peter D. Russin of Meland Russin & Budwick.
The creditor committee is represented by Robert M. Schechter of Porzio Bromberg & Newman PC and Jacqueline Calderin and Robert P. Charbonneau of Agentis PLLC.
VCH is represented by Rachel Nanes of DLA Piper.
The case is In Re: Miami International Medical Center LLC, case number 18-12741, in the U.S. Bankruptcy Court for the Southern District of Florida.
–Editing by Aaron Pelc