Fayette Regional Health System is being sold at auction.
The community’s hospital has received permission from the U.S. Bankruptcy Court in Indianapolis to sell its assets by auction. Bidding will be complete by April 30. Qualified buyers will have a final chance to raise their bids on May 2. The hospital will have new owners by May 9 if the court approves the sale.
Fayette Regional filed for reorganization under Chapter 11 of the federal bankruptcy code in October 2018. Reorganization gives the hospital time to get its financial affairs in order so that creditors – parties that are owed money – can be paid. That process may include liquidating assets by selling them.
“The bankruptcy code requires us to get the best value” for settling claims, Wendy D. Brewer, one the hospital’s Indianapolis-based bankruptcy attorneys, said on Friday. The hospital and its attorneys believe the auction will establish the highest value by allowing groups interested in buying the assets to name the price they would pay.
The sale will not involve an auctioneer looking for bids from an audience of buyers and curious onlookers. Rather, potential buyers that have been qualified because they have the necessary wherewithal to be considered serious contenders will submit written bids by April 30. Then, attorneys will review all of the bids.
“If we get more than one bid, there will be an oral auction on May 2,” Brewer said. The highest bidders will be invited to it. There, they will be asked if they wish to increase their bids. The auction will close once the bidding stops. Attorneys will review the top bid and, if it is in order, will ask the court to approve the sale. Court approval would come by May 13.
All of the hospital’s physical assets – buildings and equipment – will be included in the sale. Buyers can choose to bid on all of the combined assets or could choose to submit bids on just some of them. Bids will be analyzed to see what is the best outcome for the hospital.
The hospital’s court motion setting up the auction lists several financial claims that must be satisfied by the sale. It’s possible that one or more of the groups holding those claims might bid in the auction. Sometimes, a claim holder will submit a “stalking horse” bid to protect its investment, setting a minimum price that other buyers would have to meet, Brewer said. The hospital has no way of knowing whether this would happen, she said.
Among the listed claims is one from the bank which has provided operating funds to help the hospital pay bills and meet payroll during the Chapter 11 reorganization. That bank, Comerica Bank, has provided what is called post-petition financing, which is money lent to the hospital that would be repaid after the Chapter 11 proceeding ends. Comerica, which had also lent the hospital funds before the Chapter 11 filing, has agreed to provide up to $2.5 million during the reorganization.
The other claims listed in the order are from Comerica Bank and The Bank of New York Mellon Trust Co. for funds loaned before the Chapter 11 filing; and four liens filed by contractors and subcontractors related to work they performed at the hospital.