Hawaii Medical Center gets new lender

Kelsey Butler

November 15, 2011

The Deal Pipeline

A new lender will provide financing to bankrupt Hawaii Medical Center to help the hospital operator survive.

Prime Healthcare Services Los Angeles LLC will take over from the debtor’s former lender, MidCap Financial LLC, and provide a $15 million credit facility to the hospital operator, Lars Parkin of Scouler & Company, financial adviser to HMC, said.

The replacement debtor-in-possession financing will give fledgling HMC more time to find a buyer for its two Honolulu hospitals.

Prime Healthcare, which would provide the financing under the same terms as MidCap, is a potential buyer for the medical centers, Parkin said.

Ontario, Calif.-based Prime Healthcare operates 14 acute-care hospitals in California, according to its website.

In court papers filed June 21, MidCap agreed to provide the financing, which is priced at LIBOR plus 550 basis points with a floor of 2.5%. Judge Robert Faris of the U.S. Bankruptcy Court for the District of Hawaii in Honolulu approved the financing on a final basis on July 25, court papers show.

Prime stepped in “at the eleventh hour,” just before a Nov. 11 deadline for a sale of the hospital that was a condition of the financing, Parkin said.

MidCap had been providing financing to the hospital on a “very short-term” basis while HMC looked for a potential buyer to purchase its assets.

HMC’s largest secured creditor, St. Francis Healthcare System of Hawaii, on Oct. 26 pulled the plug on a deal that would have seen the lender forgive its $39.2 million claim in exchange for the hospital operator’s assets. According to minutes from an Oct. 26 hearing, St. Francis said it had decided against funding the hospital’s prepackaged reorganization plan because it had not expected to fund the debtor’s operations for so long.

There are now “several potential buyers” interested in HMC, Parkin said, and more than one company has made a $250,000 “earnest money deposit” related to the deal.

The debtor will give Faris an update on the sale at a Nov. 30 status hearing, Parkin said.

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Hawaii Medical Center gets new lender