Trinity Regional Hospital Sachse files Chapter 11 bankruptcy

By Sarah Lizee

Olympia, Wash., Aug. 30 – Sunland Medical Foundation, which does business as Trinity Regional Hospital Sachse, filed Chapter 11 bankruptcy on Tuesday in the U.S. Bankruptcy Court for the Northern District of Texas.

The debtor operates a not-for-profit, 32-bed, community-focused acute-care hospital in Texas that opened in November 2021.

Construction of the hospital was financed through a series of municipal bonds from multiple investors.

However, the debtor said lack of enough financing and inadequate oversight during planning and construction caused difficulties during the hospital’s opening.

The debtor obtained SC&H Capital, LLC in January 2023 to pursue a sale with the goal of recapitalizing operations. Prospective buyers had concerns about the hospital’s ground lease, however.

The hospital then attempted to renegotiate the lease terms and engaged with investors and bondholders to raise capital to purchase the hospital property from its owner, Batsu Enterprises LLC.

Those efforts failed, however, and bond trustee UMB Bank, NA filed foreclosure papers on the properties. In response, Batsu sought bankruptcy protection in the Texas court in May.

Batsu and the bond trustee settled their stay-relief disputes, resulting in the debtors buying the properties in August.

The debtor said this acquisition, combined with the more than 80 performance-improvements projects completed at the hospital, puts it in a better position to maximize value for its stakeholders by completing its financial restructuring through a 363 sale or Chapter 11 restructuring plan.

Trinity said the automatic stay and other protections provided in Chapter 11 will also help the hospital implement the restructuring, while allowing it to continue its focus on patient care.

The debtor is seeking approval of a $14 million new-money debtor-in-possession note facility with bondholders Principal Street High Income Municipal Fund, Principal Street Partners LLC, abrdn Short Duration High Yield Fund and Aberdeen Standard investments, Inc.

The DIP note facility will also include a rollup of the DIP lenders’ interests in the company’s 2020 bonds.

Trinity is seeking interim approval of $2.7 million of the DIP financing.

The company is also seeking approval to access the cash collateral of Avoue Marchand Investments, Inc., Sandton Capital Solutions Master Fund V, LP and UMB Bank.

The DIP financing is set to mature on Feb. 29 and bear interest at 12% per annum.

In its petition, the debtor listed 10,001 to 25,000 creditors, $50 million to $100 million in assets and $100 million to $500 million in liabilities.

Its largest unsecured creditor is Batsu, based in Dallas, with a $10 million unsecured loan claim. No other creditors were listed with unsecured claims of $1 million or more.

The Sachse, Tex.-based hospital filed bankruptcy under Chapter 11 case number 23-80000.

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