Grupo Hima San Pablo amends proposed DIP loan; committee opposes terms

By Sarah Lizee

Olympia, Wash., Sept. 28 – Grupo Hima San Pablo Inc. made amendments to its debtor-in-possession financing following the U.S. Bankruptcy Court for the District of Puerto Rico’s denial of its initial DIP motion, according to documents filed Wednesday with the court.

The financing was amended to, among other things, increase the facility to $7 million from $6 million and decrease the rollup to 4:1 from 5:1.

Alter Domus (US) LLC is the administrative agent and collateral agent and prepetition secured lender Island Healthcare LLC is the lender.

The Municipal Revenue Collection Center (CRIM), the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF) and the U.S. trustee overseeing the case had all filed objections to the original financing motion.

The court’s decision focused mainly on whether or not the priming of CRIM’s first-rank statutory lien under the proposed financing arrangement is appropriate, since it appears that CRIM will be the only party directly affected by the priming of its statutory lien.

The court found that the debtors had not satisfied their burden of establishing that CRIM’s first-ranked statutory lien is adequately protected, and that the debtor’s adequate protection analysis lacks crucial factual financial information on both the asset and liability side of the balance sheet, the court said.

The amended proposal provides that the DIP liens are junior to any statutory liens in favor of CRIM solely in respect of the CRIM obligations, which will allow for a sufficient equity cushion and payment of the CRIM obligations in connection with the sale process, the company said.

Also, the amended proposal segregates proceeds of the Molina litigation and the debtors’ accounts receivable outstanding for more than 120 days as part of a consensual arrangement with the debtors and first-lien secured parties.

Committee objection

The official committee of unsecured creditors filed an objection to the amended motion, saying the facility gives an outsized benefit to Alter Domus.

“The proposed DIP facility includes numerous objectionable provisions that diminish, and potentially threaten entirely, the prospect of a healthy, funded bankruptcy process that maintains the debtors’ strength as a health care provider through its pursuit of closings on the sales of ongoing hospital operations and a sensible Chapter 11 exist strategy,” the group said in the objection.

“The committee appreciates that the secured lenders are participants in the aggressively priced debtor-in-possession financing market that at times permits eye-popping fees and costs that would be untenable elsewhere, but the DIP financing motion, the DIP facility and the proposed final order should be tailored to fund a process that includes, inter alia, preservation of assets potentially available for unsecured creditors, an opportunity for the committee to perform its statutory duties, the prospect of a confirmed plan, and fair and equitable treatment of all professionals in the case.”

The Caguas, Puerto Rico-based health care services company filed bankruptcy on Aug. 15 under Chapter 11 case number 23-02510.

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