Mercy Hospital Iowa City, or MIC, will use today’s chapter 11 bankruptcy filing
to implement a planned acquisition of the hospital’s operating facilities and key assets by the University of Iowa as stalking horse bidder, according to a press release issued by MIC. The press release states that the filing and the planned acquisition were driven by recent creditor actions, which have included a petition by bond trustee Computershare Trust Co. and bondholder
representative Preston Hollow Community Capital Inc. to put MIC under receivership
The press release discloses that MIC has signed a letter of intent with the University of Iowa on a plan for the public university to acquire MIC’s assets, preserving the continuity of care for patients and continuing opportunities for physicians and employees.
To implement the plan, MIC filed a voluntary chapter 11 petition in the U.S. Bankruptcy Court in the Northern District of Iowa. “Mercy expects to seek approval of a sale process with the University serving as the ‘stalking horse bidder’ with the goal of transitioning the Hospital and its employees to a new owner and operator that intends to preserve the services provided by the Hospital to the community,” the press release states.
“The recent actions of one of our largest creditors has significantly and negatively impacted the Hospital and resulted in this bankruptcy filing” and “the Board and management moved rapidly to secure a partner to maintain health care in our community,” Chief Restructuring Officer Mark E. Toney said.
“Mercy Iowa City believes this plan is the best path forward to preserve our hospital operations,” added MIC Chairman and CEO Tom Clancy, who continued: “We are deeply appreciative of the University for finalizing an agreement that, if approved, will allow us to emerge from this process with a more sustainable future.”
The press release states that in connection with the chapter 11 filing, MIC has filed a motion with the court to use its cash and investments to fund operations. In addition, MIC has asked the court to allow the hospital to pay employees their wages and benefits in the ordinary course for the work they perform. While in chapter 11, MIC intends to operate in the ordinary course and can pay suppliers for goods and services provided after filing for bankruptcy protection, according to the statement.
In an emailed statement, Preston Hollow Community Capital asserted that MIC’s decision to file for bankruptcy “is the result of years of financial mismanagement and an ongoing refusal to take the necessary steps to restructure and stabilize its operations.”
Preston Hollow charges that the hospital “chooses to point fingers at others rather than take any accountability for their financial losses or demonstrate any willingness to seriously address the factors that led to those losses.”
Preston Hollow Community Capital says its team has consistently advised and encouraged MIC to develop and implement a substantive plan to rehabilitate and recapitalize the hospital. “The fact that they chose not to do so is the fault of Mercy Iowa City and no one else,” according to the statement.
Preston Hollow Community Capital states a commitment to ensuring families in Johnson County have access to high-quality, affordable healthcare services and “will take the steps necessary, including legal steps, to ensure that outcome is achieved.”