Bankruptcy Court Judge, Robert Faris, recently approved Hawaii Medical Center’s Chapter 11 reorganization plan, which will enable them to see life after bankruptcy by the end of the year. Consequently, Hawaii’s only for-profit hospitals will pay millions in debt starting July 1st—including roughly $43 million to their largest lenders, St. Francis Healthcare System of Hawaii and Siemens Financial Services.
It was an seemingly endless court case which at one point saw three competing reorganization plans at once. The approved plan which was filed by physician shareholders and unsecured creditors, was backed by St. Francis Healthcare System. Now, the Hawaii Medical Center is waiting for regulatory approval in converting hospitals to nonprofits. This process could take a few months at the most.
Hawaii Physician Group, LLC., which consists of over 130 Hawaiian-based physicians, will oversee all operations of the hospitals. St. Francis sold the two institutions to HMC for $68 million then provided a good deal of the financing which included a $40.2 million term loan and an $8.9 million working capital loan.
St. Francis will receive $40 million with 8% interest over the course of seven years, according to the plan. This July 1st, they will receive $6.4 million on the working capital loan. Additionally, St. Francis will be able to appoint three members to the new, nine-member board of directors—Hawaii Physician Group will select three members, the creditors’ committee will choose one and two at-large members will later be added.
“We’re pleased with the outcome, and this is the best thing for the community because there will be a lot more transparency…We want the hospitals to succeed. We’re not interested in running the hospitals; we’re interested in protecting our assets.” said St. Francis’ chief administrative officer, Jerry Correa.