Sound Shore Medical Center in bankruptcy, gets $54 million lead bid

By Caroline Salls

Pittsburgh, May 30 - Sound Shore Medical Center of Westchester filed Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the Southern District of New York after Sound Shore Health System entered into an agreement to sell substantially all of the Sound Shore debtors' real property and assets to Montefiore Medical Center for $54 million.

According to a Sound Shore news release, the health system will continue to operate as normal during the transition to Montefiore.

The company said in the bid procedures motion that the proposed purchase price includes the assumption of liabilities, the satisfaction of cure amounts, payment of amounts due under a guaranty, assumption of up to $9 million in employee liabilities and a cash payment equal to the balance of the purchase price.

As the stalking horse bidder, Montefiore has agreed to provide a $7 million to $10 million guaranty to collateralize some pre-bankruptcy loan obligations and to grant a continuing lien on post-closing accounts receivable to guaranty any shortfall in the collection of up to $5 million in revolving loan obligations.

If Montefiore is not the high bidder for the assets, Sound Shore will pay it a break-up fee equal to 3% of the purchase price and reimburse up to $750,000 of its expenses.

Competing bids must be for at least $100,000 more than the stalking horse bid, plus the amount of the break-up fee and expense reimbursement. All bidders must also be willing to make the $7 million to $10 million guaranty.

Bids at auction must be made in $100,000 increments.

The sale is expected to close by Oct. 31.

DIP financing

In conjunction with the bankruptcy filing, the medical center has obtained a commitment for $33 million in debtor-in-possession financing from MidCap Financial, LLC, consisting of a $23 million revolving credit facility and a $10 million term loan.

Interest on the revolver will be Libor plus 750 basis points with a 250 bps floor. Interest on the term loan will be Libor plus 650 bps with a 250 bps floor.

The DIP facility will mature on the earliest of 12 months from closing, the asset sale effective date and occurrence of an event of default.

A hearing on interim approval of the DIP financing and a sale procedures scheduling hearing are scheduled for May 31.

Debt details

According to court documents, Sound Shore had $159.63 million in total assets and about $200 million of debt as of Dec. 31.

The medical center's largest unsecured creditors are:

• Pension Benefit Guaranty Corp. of Baltimore, with a $9.62 million unsecured debt claim;

• Allscripts Healthcare, LLC of Philadelphia, with a $6.67 million trade debt claim;

• 1199 SEIU National Benefit, based in New York, with a $5.5 million trade debt claim;

• Dormitory Authority of SNY, based in Albany, N.Y., with a $3.35 million unsecured debt claim;

• Westchester County Health Care Corp. of Valhalla, N.Y., with a $3.21 million unsecured debt claim;

• Stryker Orthopaedics of Englewood, N.J., with a $2.43 million trade debt claim; and

• Amerisourcebergen Drug Corp. of Mansfield, Mass., with a $1.59 million trade debt claim.

The medical center is represented by Garfunkel Wild, PC.

Sound Shore is a New Rochelle, N.Y., medical center. Its Chapter 11 case number is 13-22840.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.