UMC seeks permission to file plan with U.S. Bankruptcy Court

University Medical Center of El Paso (UMC) announced Monday it is seeking permission to file a plan to preserve and continue the El Paso Children’s Hospital’s (EPCH) operations and expedite its emergence from bankruptcy.

UMC is filing its request with the U.S. Bankruptcy Court.

UMC is filing a motion to terminate the EPCH’s exclusive right to file a plan in its bankruptcy case to allow it to propose its own plan for the EPCH. UMC says the filing is consistent with its representation to the Bankruptcy Court last Tuesday, July 14.

According to UMC, under the Bankruptcy Code, a debtor like EPCH has the exclusive right to file a plan within 120 days of a bankruptcy filing. That exclusive right can be extended, or terminated, by the Bankruptcy Court.

Learn More About UMC’s Motion Below

In its motion, UMC will cite delays in EPCH’s proposing a business plan and further question EPCH’s ability to propose a feasible business plan for the Children’s Hospital within a reasonable period of time. UMC will assert that it is prepared to immediately proceed with a plan for the Children’s Hospital and present it to creditors and the Bankruptcy Court for approval. Over the past two years, EPCH has never proposed a feasible plan and their efforts to address the Children’s Hospital’s financial and operational difficulties have not been successful.

UMC’s motion will outline the plan it intends to file and seek confirmation of, if its motion is granted. The plan generally entails a transfer of EPCH’s operations to UMC in partial satisfaction of UMC’s claim against EPCH currently totaling approximately $100 million.

Among other things, the transfer of operations would involve the appointment of a new board of directors for EPCH. As presently contemplated by the UMC plan, the claims of the EPCH’s creditors (other than UMC) would be satisfied through a combination of cash payments and other consideration. The UMC plan will further provide for the dismissal of the lawsuits filed by the Children’s Hospital against UMC, which lawsuits UMC has always maintained are without merit.

In the case of unsecured creditors of the EPCH, UMC would partially subordinate a portion of its claim to permit the holders of such claims to receive a preferred distribution paid from potential sources of recoveries, including from possible claims against current and former officers and directors of the EPCH. Currently the EPCH maintains a directors and officers insurance policy to insure against such claims in the amount of $5 million.

If its motion is granted, UMC intends to request that the Bankruptcy Court shorten certain statutory timeframes in order to expedite creditors’ consideration of the plan and submission of the plan to the Bankruptcy Court’s approval. If UMC is allowed to file a plan, and the Bankruptcy Court expedites its consideration, a trial of the lawsuits filed against UMC by the Children’s Hospital could be avoided.

UMC’s decision to seek a termination of the EPCH’s exclusive right to file a plan, according to James Valenti, UMC President & CEO, is consistent with its ongoing desire to preserve the EPCH’s assets, including its diminishing cash, and operations and facilitate an expeditious exit from bankruptcy.