LOS ANGELES -- Downey Regional Medical Center emerged from bankruptcy protection Wednesday, marking only the third time in California history a hospital has done so without changing ownership, hospital officials said.
The 90-year-old not-for-profit in the Los Angeles suburbs exited Chapter 11 reorganization proceedings by closing a $52 million loan transaction that involved issuing $32.2 million of new taxable bonds through the Independent Cities Financing Authority and entering into a $20 million accounts receivable facility with Midcap Financial LLC.
The bankruptcy exit plan calls for the hospital to pay bondholders in full for its $20.6 million of outstanding tax-exempt debt, issued in 1993 through the California Health Facilities Financing Authority. The hospital has remained current on debt service during its two years in bankruptcy.
“Hospitals don’t usually survive bankruptcy intact, let alone unaffiliated, let alone during a severe national recession and an economy that did not support viable capital markets,” Kenneth Strople, president and chief executive, said in a statement. “We are especially proud that during our reorganization, we were able to continue normal business operations, including operating the emergency room and providing excellent patient care to our community.”
Under the exit strategy, $32.2 million of bonds were sold privately to RCB Equities #1 LLC in the transaction that closed Wednesday.
The hospital filed a voluntary petition for Chapter 11 reorganization on Sept. 14, 2009, citing financial system breakdowns and poor contracts. The bankruptcy judge approved the hospital’s reorganization plan on Feb. 16.
Hospital administrators said they continued to improve hospital operations during the Chapter 11 process. Those improvements included the purchase of a new cardiac catheterization lab, new general chemistry machines, and digital mammography technology, all while paying down over $17 million to creditors. Creditors will continue to receive payments while the hospital works to improve its financial performance over the next several years, officials said.
“With new health care contracts in place and our financial house in order, the hospital management team is very excited about the future, even as we face the uncertainty of the future and challenges in health care,” Strople said. “We have transformed our hospital operations and have emerged as a stronger, healthier, and more competitive community health care provider.”