September 4, 2019 – The Debtors filed a Chapter 11 Plan of liquidation and a related Disclosure Statement [Docket Nos. 2993 and 2994]; and further filed a motion requesting Court approval of their (i) Disclosure Statement and (ii) proposed Plan solicitation and voting procedures [Docket No. 2995].
As detailed by the Debtors in their Disclosure Statement, the net proceeds of the Debtors SCC Sale and the SGM Sale (each defined below) will be the primary source of funding for distributions under the Plan. With over $700.0mn in anticipated distributable proceeds, many creditor classes will escape with near 100% recoveries; with allowed claims in classes 1-9 recovering face value of their claim but generally foregoing default/make whole amounts. The waterfall, however, stops abruptly at Class 10 ("General Unsecured Creditors").
SCC and SGM Asset Sales
SCC Sale. On December 27, 2018, the Court hearing the Verity Health System cases approved the Debtors' asset purchase agreement with Santa Clara County as the stalking horse bidder for two hospitals in Santa Clara County (i.e., Saint Louise Medical Center and O’Connor Medical Center). The purchase price was $235.0mn. The SCC Sale closed on February 28, 2019. After payment of certain cure costs, closing costs and other items, the net remaining proceeds were approximately $184.38mn, which are held in four sale proceeds account. An additional $23.35 million is held in escrow by First American Title Insurance Company, the escrow agent.
SGM Sale. On April 17, 2019, the Court hearing the Verity Health System cases approved the Debtors' asset purchase agreement with The KPC Group ("KPC," an affiliate of Strategic Global Management, Inc., "SGM") further to which KPC will purchase St. Francis Medical Center in Lynwood, St. Vincent Medical Center in downtown Los Angeles, St. Vincent Dialysis Center, Seton Medical Center in Daly City, and Seton Coastside in Moss Beach. The purchase price was $610.0mn.
The Debtors anticipate the SGM Sale will close in the last quarter of 2019 if the California Attorney General imposes conditions that are substantially consistent with those set forth on Schedule 8.6 to the SGM APA. After payment of the estimated amount of certain cure costs, closing costs and other items, the net remaining proceeds from the SGM Sale are estimated to be approximately $532.0mn.
The following is a summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan):
- Class 1A (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claim is $4.0mn.
- Class 1B (“Secured PACE Tax Financing Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claim is $40.0mn.
- Class 2 (“Secured 2005 Revenue Bond Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $259.4mn and recovery is expected to be 100%, including accrued, but unpaid postpetition interest AND out-of-pocket fees and expenses, but excluding any interest at the default rate, the Tax Rate, or make whole premium.
- Class 3 (“Secured 2015 Notes Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $160.0mn and recovery is expected to be 100%, including accrued, but unpaid postpetition interest AND out-of-pocket fees and expenses, but excluding any interest at the default rate or any redemption or other premium.
- Class 4 (“Secured Series 2017 Revenue Note Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $42.0mn and recovery is expected to be 100%, including accrued, but unpaid postpetition interest AND out-of-pocket fees and expenses, but excluding any interest at a default rate, make whole premium or redemption premium.
- Class 5 (“Secured MOB I Financing Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $46.3mn and recovery is expected to be 100%, including accrued, but unpaid postpetition interest AND out-of-pocket fees and expenses, but excluding any interest at the default rate, or make whole premium.
- Class 6 (“Secured MOB II Financing Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $20.0mn and recovery is expected to be 100%, including accrued, but unpaid postpetition interest AND out-of-pocket fees and expenses, but excluding any interest at the default rate, or make whole premium.
- Class 7 (“Secured Mechanics Lien Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $2.18mn and recovery is expected to be 100%, including accrued, but unpaid postpetition interest AND out-of-pocket fees and expenses.
- Class 8 (“PBGC Claims (2)”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is (.) and recovery is expected to be 100%.
- Class 9 (“RPHE Claims (2)”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is (.) and recovery is expected to be 100%.
- Class 10 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $710.0mn. Each holder of an Allowed General Unsecured Claim shall receive a Trust Beneficial Interest and become a Trust Beneficiary, except to the extent that such Holder agrees (a) to become a Convenience Claim, (b) to a less favorable treatment of such Claim, or (c) such Claim has been paid before the Effective Date.
- Class 11 (“Convenience Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $50.0mn.
- Class 12 (“Insured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is N/A.
- Class 13 (“2016 Data Breach Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is N/A.
- Class 14 (“Subordinated General”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A.
- Class 15 (“Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A.
Key Proposed Dates:
- Disclosure Statement Objection Deadline: September 18, 2019
- Disclosure Statement Hearing: October 2, 2019
- Voting Objection Deadline: October 31, 2019
- Voting Deadline: November 7, 2019
- Confirmation Objection Deadline: November 7, 2019
- Confirmation Hearing: November 21, 2019
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