Other possible bidders emerge in LRGHealthcare bankruptcy
Possible competition could throw wrench into Concord Hospital’s acquisition plans
There’s a good chance that the owner of Concord Hospital may face some competition in its $30 million bid to acquire LRGHealthcare, which could drive up the price but also could result in costly and cumbersome litigation that would draw out the process.
The amount of interest in the bankrupt owner of Lakes Region General Hospital in Laconia and Franklin General Hospital in Franklin and other affiliates, “has been striking,” said LRGH attorney Victor Milione, at the Tuesday bankruptcy hearing
Some 47 potential bidders have expressed interest in buying the assets of LRGH, and at least 10 have gone to the “reading room” to conduct due diligence, indicating that they may be serious in making an offer, Milione told the court.
With so many potential bidders, the situation represents quite a change for cash-strapped LRGH, which had been trying for several years to find a buyer. After Covid-19 hit, Capital Region Health Care – the organization that owns Concord Hospital as well as a number of other healthcare providers – seemed to be the only one interested in acquiring LRGH, and then and only if the LRGH filed for Chapter 11 bankruptcy protection to lessen the burden of its $111 million in debt.
Capital Region became the “stalking horse” in the bankruptcy auction, willing to commit to buying LRGH. In exchange, the bankruptcy handicapped all other bidders by requiring them to pay the hospital a fee if it’s outbid at auction. But with so little interest shown in the past, most observers expected that Capital Region would be the only one to actually make a competing bid, resulting in a relatively quick process, signed sealed and delivered shortly after the Dec. 16 auction.
Indeed, many of the decisions made during Tuesday’s hearing, held by telephone because of the pandemic, seemed based on the idea that this would be a non-contentious proceeding.
One issue was the amount of money to be used to pay off Key Bank, LRGH’s main creditor, before the sale.
Andrew Helman, representing the state of New Hampshire, objected to the amount, saying that LRGH would be left with three days worth of cash if approved.
But Bankruptcy Judge Michael A. Fagone overruled the objection, arguing that there appeared to be enough cash on hand, given that LRGH would soon be sold quickly and besides, all the parties depended on this arrangement, so that the sale would happen smoothly.
“It’s more than a payment,” said Fagone. “The whole thing must be taken holistically.”
Another major issue was whether to waive the requirement that LGRH appoint a third-party independent patient ombudsman. The bankruptcy trustee objected to the request, arguing that Congress put this in the bankruptcy code to protect vulnerable patients during a cash crunch.
But Christopher M. Desiderio, another attorney for LRGH, argued that it would be costly and “distracting” to meet the requirement.
Fagone overruled this objection as well, though he said that he did so with some trepidation. He noted that the law also gave bankruptcy judges the power to waive the requirement based on particular conditions, and given what was thought to be the relatively quick nature of the sale, an ombudsman was “not warranted at this time.”
But in the end, he pointed out, a bidding war could result in litigation, adding that he didn’t feel comfortable conducting a trial telephonically if that occurs. He asked all of the attorneys to prepare for the possibility of a zoom trial, and even scheduled a date for a pre-trial hearing to go over procedures to schedule time to test the technology.