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Hospital Partners committee objects to DIP loan that gives 'too little benefit at too much cost'
By Caroline Salls
Pittsburgh, Oct. 16 - Hospital Partners of America, Inc.'s official committee of unsecured creditors objected to the company's motion for approval of $2.25 million in debtor-in-possession financing, arguing that the "DIP financing provides too little benefit at too much cost," according to a Thursday filing with the U.S. Bankruptcy Court for the District of Delaware.
"In exchange for only $2.25 million in new money, the debtors propose to provide New Enterprise Associates 10, LP, an undisputed insider of the debtors, with myriad benefits," the committee said in the objection.
The committee said those benefits being provided to the DIP lender include a $1 million roll-up that is part of a lien on $3.25 million of collateral and a lien that would encumber the unsecured creditors' potential sole source of recovery, Trinity Medical Center.
In addition, the committee said the proposed DIP financing will only provide the company with about $550,000 in additional cash above the $1.7 million it has already received through the interim DIP financing order.
"Moreover, because the DIP financing does not fund the debtors for the entire budget period through Dec. 19, 2008, it is functionally deficient," the committee said in the objection.
The committee recommended that the company "tap a less objectionable and ready source of cash," namely the subsidiary hospitals that already owe Hospital Partners roughly $53 million in unpaid obligations.
The DIP financing hearing is scheduled for Oct. 20.
Hospital Partners of America, a Charlotte, N.C.-based privately held company that develops and operates hospitals, filed for bankruptcy on Sept. 24. Its Chapter 11 case number is 08-12180.
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