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Creditors cry foul over Forum sale

June 20, 2010
By LARRY RINGLER

Forum Health's secured and unsecured creditors both objected Friday to the hospital system's effort to have the bankruptcy court approve procedures for its proposed sale to Ardent Health Services.

Meanwhile, Gov. Ted Strickland Friday filed in support of the process, which could lead to Ardent buying the nearly 3,700-worker system for $69.8 million.

In addition, hospital officials issued a statement that people who received notice of the hearing set for Tuesday in a court-ordered mass mailing don't have to attend unless they specifically want to address the sales procedure.

Former patients and anyone who has had dealings with the hospital received the hearing notice in case they were a potential creditor.

The 9:30 a.m. hearing in bankruptcy court in downtown Youngstown, however, will focus only on establishing the sales procedure, not on the merits of the proposed sale, officials said.

Secured lenders that hold about $129 million in Forum notes oppose the system's effort to win court approval for a sale process because the deal ''substantially undervalues'' Forum's assets.

They said the court should deny the sale process motion because it fails to provide a fair and open process for potential bidders for the system and so won't maximize value to creditors.

The lenders - bond insurer MBIA Insurance Corp., JP Morgan, U.S. Bank and Fifth Third Bank, known as the Consent Parties - put the net price for Forum at $52 million to $54 million after certain deductions.

The Ardent agreement also calls for a $3 million breakup fee for the Nashville, Tenn.-based for-profit hospital company if the deal fails.

The deal is subject to certain conditions, the most important being court approval of labor agreements that are limited to Ardent and so hamper competing bids that would increase the value of a sale, the creditors said.

Unsecured creditors noted the breakup fee by law must be reasonable, which they argued isn't the case with the $3 million sought by Ardent.

The creditors questioned the sale motion's assertion that the $3 million is 3.2 percent of the $94 million-plus total deal value, including assumption of liabilities.

They noted courts generally consider breakup fees to be reasonable if the fee is 1 percent to 2 percent of the value. They also said Forum should disclose how the $94 million was calculated.

Strickland's filing detailed his interest in the case in terms of the ''well-being of communities, workers and businesses affected'' by the bankruptcy.

His filing noted the area's high jobless rate compared to the national average, along with Forum's $21.1 million in charity care for poor and uninsured parents. It also provides about $24.6 million in uncompensated care, he said.

If the sale to Ardent is not approved, ''and no other bidder steps in to continue Forum Health's operations, the communities will face severe economic hardships and health care shortages,'' he stated, adding he ''respectfully requests that the court approve the sale of Forum Health to (Ardent) as proposed.''

 
 

 

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