TLC exploring ‘soft offer,’ funding
BUFFALO – Some good news for Lake Shore Health Care Center came out of TLC’s bankruptcy hearing Monday.
According to TLC Health Network’s Attorney Jeff Dove, the hospital received a “soft letter of intent” to purchase nearly all of the hospital’s assets. He said help from a broker, The Hill Group, resulted in this progress.
After the hearing he called this “soft offer” encouraging.
“The interested entity is in the business of health care delivery. Right now we need some blanks filled in and the entity has dedicated resources to doing that. It is a great start,” Dove said.
In addition to this, Dove reported the hospital anticipates working with state Senator Catharine Young and the state Health Department to receive grants or loans through the Interim Access Insurance Fund, which was created from the state saving millions in federal Medicaid costs.
He explained because this funding is based on need, TLC may not want to borrow the available $1 million from the Dormitory Authority of the State of New York.
In order to have meetings and work on the soft offer and the funding, Dove requested a one-week extension for use of cash collateral, which was due Monday for a secured loan Brooks made to TLC in February.
“We are asking for authorization to continue to use cash collateral until next week. … Because we now believe there is a higher certainty of getting these grants, the runway is longer than the end of June. The account receivables are at around $2 million and the equipment has been appraised at $3 million, so I think Brooks (loan) is protected and we can come back with more concrete numbers next week,” he said.
Brooks Attorney James Thoman of Hodgson Russ pointed out Brooks has unsecured loans in addition to the secured one. He said the secured loan was approved by the board with a time frame that the hospital be sold or its assets dissolved by the end of June.
He added he had not been authorized to accept a change in this schedule.
Judge Carl L. Bucki said he has the power to authorized the use of cash collateral, but not to force an auction.
“Suggesting this sales timeline ends this (the hospital’s operations) within 30 days,” Bucki pointed out.
Attorney for the creditors committee Steve Donato said the committee rejected the timeline, calling it “unreasonable.” He said the one-week extension would give TLC time to establish a reasonable timeline, work on the funding that could keep the hospital open for a sale and explore the soft offer.
DASNY Attorney Peter Keirnan said although this timeline was also included in the agreement for funding through DASNY, which has since expired, it is willing to work with TLC on an updated schedule “that will preserve the hospital.”
Bucki said he would not be opposed to an accelerated timeline if there were good business reasons, but “one creditor wanting a shorter timeline is not a good reason.”
He approved the one-week extension for the use of cash collateral until May 19. Also postponed was a motion to borrow funds from DASNY, which will be revisited on May 19.
After the proceedings TLC CEO John Galati said this extra week will give them “time to act.”
Judge Bucki also approved a modification to TLC’s contract with The Hill Group. Dove said the most significant change is defining the broker’s commission.
A payment change for Hodgson Russ attorneys for health care and labor relations was also approved.
The change for the frequency of which TLC’s lawyers will be paid was postponed until June when fee scheduled will be prepared.
Lake Shore Hospital submitted a closure plan to the New York State Health Department last year in October and in December filed for Chapter 11 bankruptcy. No closure date has been set and hospital officials have expressed a desire to keep the facility open for a seamless sale. No offer to purchase the hospital has been accepted, or considered by the TLC board, Lake Erie Regional Health System Board or the bankruptcy court.