Incrementally, it is happening. After the latest favorable bankruptcy court ruling last Thursday, Brotman Medical Center has advanced several steps closer to the sunlight of financial stability.
“Actually, each step is a big one for this bankrupt hospital,” said Stan Otake, Brotman’s Chief Executive Officer.
Addressing the cliff’s-edge fragility of Brotman’s drip-at-a-time emergence from year-long bankruptcy, he added, “If our disclosure statement had not been approved, I don’t know what we would have done. At that point, it might have been game-over for the current Brotman ownership group in trying to turn this thing around.”
However, Judge Sherri Bluebond, who has been shepherding the Culver City case through her downtown court, did certify the hospital’s strategy for repaying vendors, roughly at the rate of 10 cents on the dollar.
A tall, square gentleman of middling age, Mr. Otake, who came on the job last October when the powers of Brotman determined they had no choice but to file Chapter 11 bankruptcy, he brings a relaxed ambiance to a tense daily environment that might make some expired men nervous.
Rocking back in his chair, hands comfortably clasped behind his shock of dark hair, the necktie jiggled loose from his classic blue shirt, he conveys an air of confidence that he has been relentlessly promoting for 12 1/2 months, invulnerable steadiness at the helm.
“With the way that operations have improved around here, being in court (periodically) has been almost like a snowball effect,” Mr. Otake said. “Finally, it seems that everything we want to do now, we have some certain control over it in being able to fulfill our mission: That is, getting out of bankruptcy as soon as possible.”
Collegiality
The courtroom setting was relatively affable. Brotman’s Creditors’ Committee was supportive of the hospital’s disclosure statement or blueprint for starting to repay vendors. I can say we have come to terms with the people the hospital owed money to prior to the filing for bankruptcy.”
Around 300 vendors will be extending their empty, hungry hands when the round of payoffs begins. They were owed a total debt of about $20 million. This is separate from the amount owed to Brotman’s main lender since last April, Prime Healthcare of Victorville, an enormously ambitious enterprise that has been busily buying up medical properties around the state, now venturing into Northern California. Brotman’s debt to Prime — their relationship has been favorably compared to an unfavorable marriage — has been pegged at between $15 million and $31 million, with sources speculating the likely landing area will be in the low 20s.
Ultimate Compensation
In six months, another $1 million will be distributed among the vendors, who also will benefit from a $4 million Brotman-generated trust that will be paid out over a four-year period. No longer, then, will be vendors inquire, Brother, can you spare a dime?
According to Brotman’s disclosure plan, that will make a sum of $7.5 million total that will be paid vendors, raising the payback level to between 35 and 40 cents on the dollar.
In the lexicon of the finance world, Prime, which purchased the note on Brotman from its original banker, Capital Source of Chevy Chase, MD, is known as a secured lender. The vendors are tagged as unsecured, clearly a less desirable category.
“The issues that still remain,” said Mr. Otake, “are the default penalties, the interest, the impairment fees, as we call them — these will be decided by the judge prior to our confirmation hearing on Jan. 21. Basically, confirmation is the final step for emerging from bankruptcy. That is where whatever arguments that are left will be heard.”
