Is UMC’s Offer to Save El Paso Children’s Hospital Informal Bankruptcy?

As El Paso Children’s Hospital faces its Friday deadline to respond to University Medical Center’s offer, ABC is asking what would the differences be between Children’s taking the offer or filing for bankruptcy.

UMC gave Children’s the option of repaying just under half of its near $100 million debt.

For eating the cost of the other $50 million, UMC would get control of Children’s interest.

Children’s board chair Rosemary Castillo did not return phone calls and texts to ABC-7 Thursday seeking comment on the situation.

“I do think there is opportunity to prevent bankruptcy. I think bankruptcy is the worst option.” County Commissioner Vince Perez said. He is the latest to speak out against the bankruptcy option for Children’s, which has an offer on the table from UMC to forgive a portion of a nearly $90 million debt.

“I don’t think bankruptcy benefits either party,” Perez said. “It certainly doesn’t benefit the community. It’ll do severe damage to the reputation of the hospital.”

Staying out of bankruptcy could preserve Children’s ability to attract future patients and doctors.

With El Paso County Commissioners Court members warning against bankruptcy, ABC-7 talked to a local bankruptcy attorney.

“The good is they’re going to be able to reorganize their debt,” said El Paso bankruptcy attorney Edgar Borrego.

Borrego said declaring bankruptcy does not fix the issue for Children’s.

“My concern is that’s the first step, the loss of income, because even if they do a bankruptcy, they keep losing money,” Borrego said. “They’re not making money. They’re eventually going to shut down.”

El Paso County Judge Veronica Escobar said what UMC is offering Children’s is essentially bankruptcy protection without having to declare bankruptcy, allowing Children’s to preserve the hospital’s mission.

That’s something that Borrego agrees with.

“If they’re restructuring their debt, forgiving part of it, you know, it kind of sounds like an informal Chapter 11 bankruptcy,” Borrego said. “You may want to do that. That may be an excellent idea. But if that falls through they can look at a Chapter 11. But if they can get a good deal going that route (the informal Chapter 11), that’s what I would recommend.”

Escobar told ABC-7 she never received a formal request from the Children’s chair for a meeting with County Commissioners Court to further discuss UMC’s terms. So it appears that meeting is not going to happen.