Watsonville Hospital Corporation – Files Revised First Amended Plan of Liquidation and Supporting Plan Documents Ahead of July 27 Confirmation Hearing | Daily updates from bankrupt companies

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July 18, 2022 – Ahead of their July 27 plan confirmation hearing, the debtors filed an amended Amended First Plan of Liquidation and related black line showing minor changes to the version of the plan filed on June 8, 2022 [Docket Nos. 616 and 617, respectively]. The Debtors have also filed (i) a memorandum of law in support of the confirmation of the Plan (the “Memorandum”) [Docket No. 623 which attached a proposed confirmation order and notes that there are no outstanding objections] and (ii) the results of the vote on the plan [Docket No. 618].

On June 14, 2022, the Court issued an order approving: (i) the adequacy of the information statement filed by the debtors and the official committee of unsecured creditors (the “Committee” and, together with the debtors, the “promoters of the plan”), (ii) the procedures for soliciting and voting on the plan and (iii) a timeline culminating in the plan confirmation hearing of July 27 [Docket No. 557].

Plan Overview

The memorandum provides the most recent summary: “The plan, which resulted from lengthy negotiations between the Debtors, the Committee and the Debtors’ Lender to balance many competing interests, represents a significant achievement that pave the way for an efficient liquidation and claims reconciliation process after the planned closing of the asset sale. Following the solicitation process, the Plan received overwhelming support from every voting class. Among other things, the plan provides for the establishment of a winding-up trust and the appointment of a winding-up trustee who liquidate the remaining assets* of the estates after the closing of the sale of assets and distribute these assets in accordance with the terms of the plan and the priorities of the bankruptcy code. The plan is the culmination of months of effort by plan sponsors to restructure debtors’ debts, set the table for closing the sale of assets, preserve the value of estates, and establish a mechanism to return that value to debtors’ creditors. .

* Debtors anticipate that estates will have approximately $8.0 million in total cash on hand at the assumed effective date of August 31, 2022, consisting largely of proceeds from the sale of assets and reserves DIP order.

Upon closing of the Asset Sale, which the Debtors believe will occur on or about August 31, 2022, the Debtors will have liquidated substantially all of their assets, excluding, among other causes of action retained (including tort claims and D&O Claims). The net proceeds from the sale of assets, together with the estates’ remaining assets (including successful causes of action) and their proceeds, will be used to fund payments and distributions under the plan, including any recoveries to debtors. creditors. The plan sponsors believe that the plan will place debtors in the best position under the circumstances to realize the value of their estate for the benefit of all voters. In light of the general opinion of the Plan, the overwhelming support of all struggling stakeholders, and the satisfaction of the confirmation requirements of Section 1129(a) of the Bankruptcy Code, as set out in more detail below , the Plan must now be confirmed.

The Disclosure Statement [Docket No. 544] note, “The plan is a liquidation plan which, among other things, provides for a liquidation trustee to liquidate or otherwise dispose of the remaining assets of the estates, to the extent such assets have not previously been monetized in cash or otherwise transferred by the Debtors prior to the Effective Date (including, without limitation, pursuant to the post-petition bankruptcy court-approved sale of substantially all of the Debtors’ assets, more fully described below).

The liquidating trustee would also distribute all net proceeds to creditors, including full payment of all permitted administrative expense claims, permitted priority tax claims, permitted other priority claims (Class 1), and permitted other secured claims (Class 2) (subject to liquidating the trustee’s choice of alternative treatments under the plan and only to the extent of the value of the security which secured such claims), generally in accordance with the priority scheme under the code of the bankruptcy, subject to the terms of the plan.

In such Chapter 11 Cases, subject to the occurrence of Closing, the Debtors have already liquidated substantially all of their respective assets in the Asset Sale, excluding the Causes of Action which have not been waived or settled pursuant to or under the Plan, all of which shall be retained unless the Plan expressly provides otherwise. The net proceeds remaining from the sale of assets, together with the net proceeds from the sale or other disposition of the estates’ remaining assets after the effective date, will be used to fund recoveries under the plan to authorized claim holders entitled to distributions under the plan….

Domains also contain Potential causes of action that will be transferred to the Liquidation Fund under the Plan, all of which are retained unless the Plan expressly provides otherwise. No value has been assigned to the legal claims for the purposes of this statement and the plan takeover analysis. »

The following is an unchanged summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Statement; see also Plan Reinstatement Analysis below ):

  • Class 1 (“Other Senior Claims”) is intact, deemed to accept and not entitled to vote on the plan.
  • Class 2 (“Other Secured Claims”) is intact, deemed to accept and not entitled to vote on the plan.
  • Class 3 (“Other MPT bonds”) is compromised and has the right to vote on the plan. The total amount of claims is approximately $27,632,813 and the estimated recovery is 0%FN. Each Holder will receive their Prorated share of: (i) MPT’s Excess Sales Proceeds, if any, to the extent not already paid; (ii) MPT’s post-closing excess cash, if any, to the extent that it has not already been paid; and (iii) Class A Liquidation Fund Interest, which will entitle such Holder to its Pro-Rated Share of Class A Liquidation Fund Assets. , if any, MPT’s excess cash after closing, if any, and Class A Liquidation Trust interest, all liens of MPT’s pre-petition lender and its affiliates , including MPT of Watsonville, LLC, shall be satisfied, extinguished and released, provided, however, that the MPT parties shall be entitled to retain and enforce as they see fit any cash collateral or other deposit held by the MPT parties to the MPT pre-petition bond title.

FN: For avoidance of doubt, the Other MPT Obligations do not include payments to be made to the MPT Parties under the DIP Obligations and Postpetition Lease Obligations (if any). Pursuant to the Sale Approval Order upon closing of the sale, prior to the Plan Effective Date, the Buyer will make the direct MPT payment of up to $34,000,000 to the DIP Lender and the MPT pre-petition lender.

  • Class 4 (“Unsecured General Claims”) is compromised and has the right to vote on the plan. The total amount of claims is approximately $33,793,902 and the estimated recovery is 5% to 10%FN. Each Holder will receive his Pro-Rata share of the Class B Liquidation Fund Interest, which will entitle him to his Pro-Rate Share of the Class B Liquidation Fund Assets.

FN: Debtors expect general class 4 unsecured creditors to likely receive recovery of around 5-15% after taking into account the potential assumption of enforceable contracts and unexpired leases under the sale and early opposition to certain proofs of claim. by the debtors or the liquidator. Potential recoveries on estate causes of action have not been included in this recovery range estimate.

  • Class 5 (“Intercompany Claims”) is compromised, deemed accepted/deemed rejected and is not entitled to vote on the Plan.
  • Class 6 (“Participations”) is voided, deemed accept/deemed reject and is not entitled to vote on the Plan.

Voting results

On July 18, 2022, the Debtors Claims Agent notified the court of the results of the plan vote [Docket No. 618] which were as follows.

  • Class 3 (“Other MPT Obligations”): 1 claim holder, representing $40,132,813 (100%) in amount and 100% in number, voted in favor of the Plan.
  • Class 4 (“General Unsecured Claims”): 123 claim holders, representing $12,865,385.75 (99.4%) in amount and 99.2% in number, voted in favor of the Plan. 1 claim holder, representing $73,212.05 (0.6%) in amount and 0.8% in number, rejected the Plan.

Key documents

The Disclosure Statement [Docket No. 544] attach the following parts

  • Exhibit A: Plan sponsors’ joint liquidation plan
  • Appendix B: Company Organizational Chart
  • Exhibit C: Plan Recovery Analysis

Debtors Diet Supplement [Docket No. 602] attach the following:

  • Exhibit 1: Winding up trust agreement

Key dates

  • Plan Supplement Deadline: July 11, 2022
  • Objection deadline for voting and confirmation: July 15, 2022
  • Confirmation hearing: July 27, 2022

Sale of assets

On February 23, 2022, following a decision on the call for tenders procedure of January 10 [Docket No. 188] and a sale hearing on February 23, the court hearing the matters of the Watsonville Hospital Corporation issued an order approving the sale of substantially all of the debtors’ assets to the Pajaro Valley Health Care District Project (the ” buyer” or the “project”) [Docket No. 347].

On February 16, the debtors informed the court that in the absence of any other qualified bids before the auction deadline of February 14, the auction scheduled for February 17 had been canceled and the buyer had been appointed. as the successful bidder. [Docket No. 308].

The Project’s stalking horse offer includes cash consideration consisting of (i) amounts due to MPT from Watsonville Lender, LLC (“MPT”) under the DIP Loans (including the cumulative $3.5 million advanced on November 30, but excluding other pre-demand loans) up to $25.0 million and (ii) $9.0 million payable to MPT in respect of its secured personal property claim debtors.

Recovery Analysis Plan (see Annex C of the declaration [Docket No. 544] for notes)

About debtors

According to Debtors“Watsonville Community Hospital is your community health care provider; a 106-bed facility that provides a comprehensive portfolio of medical and surgical services to the culturally diverse tri-county region along California’s central coast.

We believe in the power of people to create quality care. We have over 620 employees and over 200 physicians. The doctors and staff at Watsonville Community Hospital strive to exceed patient expectations, while providing quality care with compassion. »

Company structure flowchart

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