Brotman Medical Center exits Chapter 11 bankruptcy, plan takes effect

By Caroline Salls

Pittsburgh, April 15 - Brotman Medical Center, Inc. emerged from Chapter 11 bankruptcy when its plan of reorganization took effect on Tuesday, according to a filing with the U.S. Bankruptcy Court for the Central District of California.

The plan will be funded by the reorganized company's cash on hand, the proceeds of $23 million in financing from the Jewish Home for the Aging, the proceeds of a $5 million three-year exit facility from Presidential HealthCare Credit Corp. and a new value contribution from interest holders.

The exit financing will bear interest at Libor plus 500 basis points, according to the commitment letter.

A total of $3.5 million of the proceeds of the new value contribution will be deposited into a creditor trust for distribution to unsecured creditors, as well as a $4 million 7.5% four-year note.

The creditor trust assets will also include net litigation proceeds and up to $125,000 for the fees and expenses incurred by the trust for bringing objections to unsecured and small claims, to be paid into the trust by the reorganized company.

Creditor treatment

Treatment of creditors will include:

• Holders of administrative claims, professional fee claims, prime claims and priority claims will recover 100% in cash;

• Holders of priority tax claims will recover 100% in cash, payable in six annual installments, plus interest;

• Holders of secured claims will recover 100% either in cash, through the return of the collateral securing the claim or through curing of any default, reinstatement of the maturity of the claim or leaving the claim unaltered;

• Holders of general unsecured claims will receive their share of assets of the creditor trust, minus the amount necessary to pay small claims;

• Holders of small claims, which are unsecured claims of $10,000 or less, will receive a cash payment equal to 35% of their claim;

• The holder of the Center for Medicare and Medicaid Services claim will retain its pre-confirmation rights; and

• Interest holders will receive new common stock in exchange for their new value contribution.

The amount of each interest holder's contribution will be determined by reference to the percentage of ownership interest that the holder possesses based on its existing stock multiplied by $3.5 million.

As previously reported, Prime Healthcare Services Los Angeles, LLC appealed the plan confirmation order on March 30, claiming that the plan fails to pay it more than $8 million it is owed under a previous court order.

Brotman, a privately held medical center serving the West Los Angeles, Calif., area, filed for bankruptcy on Oct. 25, 2007. Its Chapter 11 case number is 07-19705.

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