Hutcheson Medical Center leaders are trying to move toward an auction sale. And soon.
"In light of (the hospital's) lack of liquidity," attorney Hayden Kepner Jr. wrote in a U.S. Bankruptcy Court motion Tuesday, "it is imperative that the Debtors' assets be sold as expeditiously as possible."
Kepner asked Judge Paul Bonapfel to sign an order allowing the Hospital Authority for Walker, Dade and Catoosa counties to schedule a time to auction off the hospital. Bonapfel will hold a hearing Wednesday at 9:25 a.m.
According to Kepner's motion, the hospital could be sold off in parts, with different bidders taking the main campus, the nursing home, the surgery center on Battlefield Parkway and the clinics scattered in the counties. The Dade County government bought the Trenton clinic in September.
The hospital leaders would hold two auctions. In the first, bidders would compete for different hospital assets. Once that auction ended, bidders would offer to buy all the assets in one bundle.
The hospital's leaders, along with a court-appointed trustee, a group of creditors and Regions Bank official would decide which route was best: to sell the assets separately or as a whole.
According to Kepner's motion, this group is already negotiating with "one or more definitive" bidders. Kepner wrote that he is bringing this information before the judge before receiving a formal offer because the hospital leaders want to move fast. Hutcheson has "limited cash."
Hutcheson leaders filed for Chapter 11 bankruptcy in November, when the hospital owed about $82 million. That included about $26 million of secured debt, most of which will go to Regions Bank. Erlanger Health System, which loaned Hutcheson about $20 million in 2011, also expects its money back because the Catoosa and Walker county leaders guaranteed that loan.
In August, U.S. bankruptcy trustee Martin Ochs moved to end the bankruptcy case, arguing that Hutcheson's leaders had yet to create a plan to reorganize their structure — the main point of filing for Chapter 11 bankruptcy. At the time, the hospital had incurred about $6 million more debt since filing the case in November.
Ochs withdrew his motion, though, after Hutcheson CEO Farrell Hayes testified on Sept. 2 that he was close to finding a buyer for the hospital. He believed he would receive the bid within about a week of his testimony.
In his motion Tuesday, Kepner proposed using a "stalking horse bid" to set the ground floor for the auction. Then, at the appropriate time, more bidders could meet and compete for part or all the assets. The first bid would need to be at least $100,000 higher than the stalking horse bid. After that, all bids would need to increase by at least $50,000 from the bid that is in line to win.
The winning bidder would need to be able to pay in cash.
Contact staff writer Tyler Jett at email@example.com or at 423-757-6476.