Home News Brotman Wins Crucial Court Ruling — Unloading Prime Healthcare Is Next

Brotman Wins Crucial Court Ruling — Unloading Prime Healthcare Is Next

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Edging toward solvency, perhaps within the next 100 days, Brotman Medical Center scored a pivotal courtroom victory on Thursday afternoon when a bankruptcy judge pared one bitterly disputed debt to its lender by about 80 percent.

“This is a monumental moment because the ruling was incredibly favorable for Brotman,” Stan Otake, the Culver City hospital’s upbeat chief executive officer, told the newspaper today.

Not only was a financial burden in the $8 million range lifted, inflicting a stinging defeat on Prime Healthcare, Inc., of Victorville, Mr. Otake believes the verdict effectively will finish off Brotman’s decidedly unhappy 4-month relationship with the feisty little company.

Equally sweet to Brotman is the resulting likelihood that the court ruling will smother once-confident Prime’s bold springtime strategy of acquiring the hospital by first becoming its hard-nosed lender.

Mr. Otake said negotiations will open next week to end their agreement.


When Their Luck Changed

For all of the prickliness that has marked the involuntary coupling of Brotman and Prime, the hospital’s fortunes have been on a winning streak since Prime — a controversial company because of its aggressive posture, policies, modest size and supposedly outsized ambitions — forcefully supplanted Brotman’s original lender in early April.

A little more than a fortnight ago, on July 9, the Jewish Home for the Aging, based on two campuses in the San FernandoValley, signed a $23 million deal to purchase 2.4 acres, the westerly half of Brotman’s Downtown property, with a 2-year option to acquire the balance.

This appears to be one of those striking business arrangements whereby both parties derive long-sought benefits.

Fulfilling a Goal

The Jewish Home has actively pursued a site in the city for a number of years, since half of the Los Angeles Jewish population lives here.

The Home’s announced intention is to convert its half of the Brotman grounds into an assisted living facility.

The eastern half will be reconfigured as a downsized version of present-day Brotman, offering many or most of present services. The recalibration is expected to be 3 to 5 years away.

Meanwhile, Brotman’s niftily timed agreement with the Jewish Home will provide it with the much needed capital to make Prime go away for good. Sources forecast Prime’s settlement price in the neighborhood of $22 million.

At issue in Thursday’s federal bankruptcy court hearing, before Judge Sheri Bluebond, was a claim by Prime for approximately $10 million in impairment fees.

These cover such categories as late fees charged on Brotman’s loan, initially with Capital Source of Maryland, Prime’s predecessor, and non-compliance fees.


How the Debt Impeded Brotman

Mr. Otake described the $10 million in dispute as “a significant dollar amount that hindered Brotman’s ability to take out Prime, and, more importantly, Brotman’s ability to get out of bankruptcy.”

After stormy years of withering criticism, from within and without, over its policies and practices, spiced by devastating rumors, Brotman filed Chapter 11 bankruptcy last October, an action long forecast.

Mr. Otake, who stepped in as CEO at the time of the filing last autumn to rescue the hospital, has placed it on a steadily upward trajectory since the start of the calendar year.

By the time Brotman reaches the one-year anniversary of its bankruptcy filing, Mr. Otake expects to reverse the burial predictions of critics by emerging as a solvent facility. This would mark not only a jumbo turnaround but a mercurial one.


(To be concluded on Monday)