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November 11, 2020 – The Debtors and the Lapis PartiesFN (collectively, the “Plan Proponents”) filed a Second Amended Plan of Reorganization and a related Disclosure Statement [Docket Nos. 1986 and 1987, respectively]; and separately filed redlines showing changes to the versions of each document filed on November 4, 2020 [Docket No. 1989].
FN Lapis Parties means the DIP Agent, DIP Lenders, UMB Bank, N.A. as indenture trustee for the Senior Secured Bond Debt Claims, and Holders of the Senior Secured Bond Debt Claims and the Senior Secured Credit Agreement Claims, and any fund managed by or affiliated with any of the foregoing.
[Update] On November 12th, the Court hearing the Astria Health cases issued an order approving (i) the Debtors’ Disclosure Statement, (ii) proposed Plan solicitation and voting procedures and (iii) a proposed timetable culminating in a December 18th Plan confirmation hearing [Docket No. 1991].
The Disclosure Statement [Docket No. 1987] provides: “The Plan is built around the following key elements:
- The Debtors will be deemed consolidated for the sole purpose of treatment of Claims and liabilities under a single Plan, but will otherwise retain the separate corporate structure of individual Debtors (and any other Debtor not included therein shall be treated under a separate Plan).
- AH NP 2, a Washington nonprofit corporation and currently a wholly owned nondebtor subsidiary of Astria, will become the sole member of Astria; and Astria will change from a no-member nonprofit corporation to a single member nonprofit corporation
- A newly created non-debtor entity, AH System, a freestanding Washington nonprofit corporation, will assume the non-discharged debt of the Debtors in exchange for AH NP 2’s transfer of its sole membership interest in Astria to AH System.
- The Lapis Parties have agreed to reinstatement of the Senior Secured Bond Debt Claims which will be paid by the Reorganized Debtors over time.
- AH System will issue debt instruments described in the scheduled attached as Exhibit A to the Plan to satisfy the DIP Claims and Senior Secured Credit Agreement Claims in full.
- A GUC Distribution Trust will be created to pursue all Avoidance Actions, (other than any Avoidance Actions against the Debtors’ vendor that provided revenue cycle, billing and collection services to the Debtors pre-petition and as of the Petition Date (collectively with such vendor’s affiliates, the 'Vendor')), reconcile General Unsecured Claims, receive certain assets from the Debtors and/or Reorganized Debtors (including the Initial GUC Distribution Amount of $5 million and additional funds totaling not less than $2.3 million) and make pro rata distributions to Holders of General Unsecured Claims consistent with the terms of the Plan.
- A Liquidation Trust (together with the GUC Distribution Trust, the 'Plan Trusts' and each individually, a 'Plan Trust') will be created from assets of the Debtors not necessary for the operation of their core health care businesses or constituting GUC Distribution Trust Assets under the Plan. In the event any assets in the Liquidation Trust are liquidated, the proceeds of such liquidation shall be used to fund AH System’s operating cash account up to an amount equal to the lesser of $10 million or 30 days cash on hand and then to pay debt issued by AH System.
- Holders of Allowed Claims will receive a distribution of Cash or proceeds from the applicable Plan Trust, consistent with the priority provisions of the Bankruptcy Code.
- All Intercompany Claims will be expunged and eliminated through the limited consolidation of the Debtors for purposes of treatment of Claims and distributions under the Plan.
- The Debtors will proceed with the Closure Plan of SHC Medical Center – Yakima, doing business as Astria Regional Medical Center ('ARMC' or the 'Medical Center') in Yakima, Washington, and dissolve the non-operating Debtors relating thereto.”
The following is a summary of classes, claims, voting rights, and expected recoveries (defined terms are as in the Plan and/or Disclosure Statement, changes in bold):
- Class 1 (“Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is Unknown and the estimated recovery is –%.
- Class 2A (“Senior Secured Bond Debt Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $43,571,500.00 and the estimated recovery is –%. In accordance with the Senior Debt 9019 Settlement, all Senior Secured Bond Debt Claims shall be Allowed and reinstated without setoff, reduction or subordination on the terms of the Exchange Debt Documents in the amount of all such Senior Secured Bond Debt Claims as of the Effective Date.
- Class 2B (“Senior Secured Credit Agreement Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $13,162,397.26 and the estimated recovery is –%. In accordance with the Senior Debt 9019 Settlement, all Senior Secured Credit Agreement Claims shall be Allowed and satisfied, without setoff, reduction, subordination or challenge, by the exchange of all Senior Secured Credit Agreement Claims for Senior Secured Credit Agreement Exchange Debt with the attributes described in the schedule attached to the Plan in Exhibit A in the amount of all Senior Secured Credit Agreement Claims as of the Effective Date.
- Class 2C (“Other Secured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is Unknown and the estimated recovery is –%. On or as soon as practicable after the Effective Date, each Holder of an Other Secured Claim will receive from the assets of the Debtors, at the discretion of the Debtors, (i) cash equal to the full amount of its Claim, (ii) a reinstated note on the same payment and collateral terms as its prior Claim, (iii) a return of collateral securing the Claim against the Debtor, with any deficiency to result in a General Unsecured Claim, or (iv) such less favorable treatment to which the Holder otherwise agrees.
- Class 3 (“Convenience Class Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $1,611,501 assuming all claimants with Claims between $5,000 and $10,000 elect Class 3 treatment, and the estimated recovery is –%. These Holders will be paid 20% of the allowed amount of the claim up to a maximum of $1,000 on the Effective Date or as soon as practicable thereafter. There shall be no limitation on the number of Convenience Class members.
- Class 4 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $101,950,399.80 and the estimated recovery is –%. Holders of General Unsecured Claims shall receive, on one or more GUC Distribution Dates, a Pro Rata share of the Net GUC Distribution Trust Assets.
- Class 4A (“Insured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $– and the estimated recovery is –%. Subject to the terms and conditions set forth in in the Plan, Holders of Insured Claims in Class 4A shall recover only from the available insurance and Debtors shall be discharged to the extent of any such excess. As of the Effective Date, all Insured Claims are disputed.
- Class 5 (“Intercompany Claims”) All intercompany claims shall be expunged and eliminated through the limited consolidation of the Debtors for purposes of treatment of Claims and distributions under the Plan.
Committee Objection and Settlement
The Plan and Disclosure Statement now reflect the terms of a settlement reached with the Official Committee of Unsecured Creditors (the "Committee Plan Settlement") that results in changes to the proposed treatment of General Unsecured Creditors. The Amended Disclosure Statement reads, "The Plan also embodies the Committee Plan Settlement set forth in the Term Sheet. The treatment of General Unsecured Claims provided for herein consistent with the Term Sheet reflects a compromise and settlement of numerous complex issues including, but not limited to, those set forth in the Limited Objection of Official Committee of Unsecured Creditors (more on objection below) to Motion for an Order Approving: (i) Proposed Disclosure Statement; (ii) Solicitation and Voting Procedures; (iii) Notice and Objection Procedure for Confirmation of Joint Plan of Reorganization; and (iv) Granting Related Relief filed at Docket No. 1624. The Committee Plan Settlement provides final resolution of all issues relating to the treatment of General Unsecured Claims under this Plan. The Plan shall constitute a motion to approve the Committee Plan Settlement pursuant to Bankruptcy Rule 9019 and a finding by the Bankruptcy Court that the Committee Plan Settlement is in the best interest of the Debtors and their Estates."
In its July 30, 2020 limited objection to approval of the Disclosure Statement for the Initial Plan [Docket No. 624], the Committee stated, "The Debtors’ Plan, negotiated among the Debtors and their secured creditors Lapis Advisers, LP ('Lapis') and UMB Bank, N.A. ('UMB,' and together with Lapis and UMB, the 'Plan Proponents') to the Committee’s exclusion, is deeply flawed and fails to meet the confirmation requirements of section 1129 of the Bankruptcy Code.
Notwithstanding the fact that the Debtors, on a consolidated basis, may be in the best financial position in years as a result of closure of SHC Medical Center – Yakima and the Debtors collectively hold approximately $29 million of cash on hand (based on recent operating reports), the proposed Plan allocates all of the Debtors’ distributable value to the reorganized Debtors and the Debtors’ secured creditors while providing the Class 4 general unsecured creditors only a pro rata share of any proceeds of the estates’ avoidance actions arising under chapter 5 of the Bankruptcy Code, which would result in the mere redistribution of potential litigation proceeds within the general unsecured class.
The Committee intends to demonstrate through discovery to be conducted in this contested matter that the Debtors’ total enterprise value, combined with other distributable assets, exceeds the secured debt and administrative and priority claims as of the projected effective date of the Plan. This 'excess' value should be shared by the Class 4 general unsecured creditors consistent with the provisions of section 1129 of the Bankruptcy Code. Accordingly, as currently structured, the Plan is not in the best interests of, or fair and equitable with respect to, the Class 4 general unsecured creditors, and should not be confirmed."
The Disclosure Statement [Docket No. 1987] attached the followed exhibits:
- Exhibit A: First Amended Joint Chapter 11 Plan of Reorganization
- Exhibit B: Liquidation Analysis
- Exhibit C: Financial Projections
- Voting Deadline: December 4, 2020
- Objection Deadline: December 4, 2020
- Confirmation Hearing: December 18, 2020
Liquidation Analysis (See Disclosure Statement [Docket No. 1987] Exhibit B for notes)
Corporate Structure Chart (See Docket No. 1986)
About the Debtors
According to the Debtors: “The Astria Health system, headquartered in the heart of the state of Washington’s wine country in the beautiful Yakima Valley, is the largest non-profit healthcare system based in Eastern Washington. Astria Health is the parent non-profit organization of Astria Sunnyside Hospital and Astria Toppenish Hospital and delivers care throughout the Valley through its Astria Health Hospitals and its Astria Ambulatory Care model focused on delivering the highest level of ambulatory and outpatient care in convenient locations in both the Lower and Upper Yakima Valley. Astria Ambulatory Care is designed to meet the changing lifestyles and diverse needs of those living and working throughout the region.
Astria Health delivers both inpatient hospital care and emergency services, ambulatory care, and outpatient services throughout the Yakima Valley. Inpatient Hospital and Emergency care is provided at two community-focused Astria Health Hospitals; Astria Sunnyside Hospital and Astria Toppenish Hospital. Astria Health’s continuum of care services include hospitals, outpatient Astria Health Centers (14 medical clinics and 24 specialty clinics), Ambulatory Surgical Centers, Astria Hearing and Speech, Astria Home Health and Hospice, and medical services customized specifically for the region and based on specific community need. The Astria Health system ensures healthcare sites and providers are conveniently located in towns and cities throughout the Region to ensure convenient access to quality healthcare at all times.”
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