HONOLULU (HawaiiNewsNow) - St. Francis Healthcare System of Hawaii has filed an objection in U.S. Bankruptcy Court to the proposed sale of Hawaii Medical Center's hospitals to Prime Healthcare Services Foundation.
Prime Healthcare is bidding 25 million dollars for both the Liliha and Ewa hospitals.
St. Francis also believes that part of sale 'violates the Bankruptcy Code.'
The following is the news release from the St. Francis Healthcare System:
Hawaii Medical Center has proposed a sale of its hospitals to Prime Healthcare Services Foundation and intends to conduct an auction to determine whether any higher or better offers for the hospitals will be made. Yesterday, St. Francis Healthcare System of Hawaii filed an objection to the procedures proposed by Hawaii Medical Center for conducting the auction.
Right to Credit Bid
Hawaii Medical Center's proposed auction procedures prohibit St. Francis Healthcare System of Hawaii from bidding the amount of its secured claim at the auction – commonly referred to as credit bidding - despite the fact that the Bankruptcy Court previously entered an order confirming that St. Francis had the right to credit bid at a sale of its collateral. With a credit bid, the value of the bid is based upon the amount of the claim of the secured creditor, which is then offset against the purchase price.
St. Francis Should Not Be Responsible For Break-Up Fee
The bidding procedures motion also requests allowance of a fee of $625,000 for Prime Healthcare Services Foundation if another bidder offers a higher bid for the hospitals or if Hawaii Medical Center decides not to sell the hospitals. St. Francis Healthcare System of Hawaii is not opposed to a break-up fee to this stalking horse bidder; however, the break-up fee should not take precedence over St. Francis's claims as a secured creditor.
Priority in Sale Proceeds
In addition to seeking approval of procedures for conducting an auction, Hawaii Medical Center also filed a motion to approve the sale to Prime Healthcare Services Foundation. In the sale motion, Hawaii Medical Center proposes to distribute a substantial portion of the sale proceeds to creditors that are junior in priority to the claims of St. Francis Healthcare System of Hawaii. St. Francis believes that the proposed distribution scheme violates the Bankruptcy Code and intends to challenge such distributions in connection with the sale motion at the appropriate time to protect its rights.