RINGGOLD, Ga. - Some Hutcheson Medical Center property could soon be for sale.
Representatives for Regions Bank announced this week they are hoping to sell land in Fort Oglethorpe and a building in Ringgold on the steps of the Catoosa County Courthouse on May 3. However, Hutcheson bankruptcy attorney Rob Williamson said, Regions still needs permission from a judge.
Hutcheson, which filed for bankruptcy in November 2014 and is in the process of being sold to an Atlanta-based physician's group, owes Regions about $26 million. When the bank loaned Hutcheson that money years ago, the hospital offered some property to guarantee that Regions would at least get some of the money if the deal went bad, which it did.
Regions is hoping to sell the ambulatory surgery and cancer center that Hutcheson operated on Battlefield Parkway until the hospital temporarily closed in December. Regions is also looking to sell 65 acres of land that sits next to Hutcheson's main campus off LaFayette Road in Fort Oglethorpe. The bank's land there is mostly undeveloped, though it does hold seven duplexes and one stand-alone home.
Although ApolloMD is in the process of buying Hutcheson, the purchase is still pending some legal loopholes. ApolloMD's team hopes the sale is final by early May, but until then, Hutcheson still sits in bankruptcy. And as a result, Regions' actual foreclosure of Hutcheson's property may have to be put on hold.
Williamson said a bankruptcy judge gave Regions permission to advertise the sale in the local legal organs: the Catoosa County News and the Walker County Messenger. But Regions would still need permission to hold the actual sale. Williamson said a trustee overseeing Hutcheson's finances needs to sign off on Regions' intentions to sell the property.
Hutcheson's debt to Regions extends back to about 1998, said Ed Wall, a former financial adviser for Walker County and the hospital. In 2008, when the debt sat around $23 million, Wall said Hutcheson leadership decided to refinance the deal with Regions. This allowed Hutcheson to get up to $12 million more, if needed.
Morgan Keegan, an investment firm, sold bonds on behalf of Hutcheson. Hutcheson would then make payments to Regions, Wall said, and Regions would make payments for Morgan Keegan.
But soon, Wall said, the deal went south. He said Hutcheson failed to meet the covenants for the bond deal after about one year. Wall didn't remember the specific issues, though these deals often fall apart for technical reasons. For example, Wall said, the deal could demand that a borrower keep 100 days' worth of cash on hand. When the cash on hand dips below that, the whole deal is off.
In this case, Wall said, Regions froze the deal after Hutcheson used about $2 million. This increased the debt from $23 million to $25 million. Add interest, and Hutcheson found itself owing Regions $26 million.
"Hutcheson's problems are tied to their own financial performance," said Wall, who began advising the hospital around 2010. "It had nothing to do with the housing market crisis."
If Regions does sell the property, Catoosa County Attorney Clifton "Skip" Patty said the deal will likely net the bank millions of dollars fewer than Hutcheson actually owes Regions. He added that the May 3 "sale" might actually be just a procedural, first step.
An actual sale could take place down the road, between Regions and an as-of-yet unknown suitor.
"Typically," Patty said, "when you do these things, the lender will make the first bid for the full amount of the debt. If somebody bids more, plus (the cost of) attorneys' fees, the lender would sell to the them.
But otherwise, the lender would buy the property for themselves."
Contact staff writer Tyler Jett at tjett@times freepress.com or at 423-757-6476.