SUNNYSIDE — Astria Health was granted the motion to obtain Chapter 11 relief in the form $28 million in debtor in possession financing on May 9.
JMB Capital Partners Lending is, according to bankruptcy papers, the lender.
Lapis Advisers of San Francisco objected to the request for relief in U.S. Bankruptcy Court Eastern District of Washington at Yakima, citing a number of issues with Astria’s restructuring plan.
“The lenders (Lapis) comprise more than two-thirds of the debtors’ (Astria) nearly $75 million of secured funded debt in these proceedings,” the objection filed by Attorney Mark Northrup of Seattle’s Miller Nash Graham & Dunn on behalf of Lapis and UMB Bank states.
A search through Lapis’ portfolio revealed the firm loaned Astria $35.4 million for the purchase of Yakima Regional Medical and Cardiac Center, as well as Toppenish Community Hospital in 2017.
That was confirmed in court documents showing Lapis loaned Astria another $10 million this past January.
That’s on top of loans by Banner Bank amounting to more than $27 million, a loan from MidCap Financial in the amount of $10.7 million and another $5 million owed GE HFS for equipment at the Toppenish and Yakima hospitals.
Northrup told the Sunnyside Sun he was unwilling to comment beyond the court documents without authorization from his client.
When Lapis Advisers were contacted, the Sunnyside Sun was referred to a case database for answers.
In the objection, it is stated Astria approached Lapis in January. “The debtors’ storyline depicts an upstart hospital system victimized by the botched roll out of a critical hospital billing and collection system in the second year of its integration process.”
The billing and collections system not working is not disputed. However, Lapis contends the same story was given when the new line of credit was extended.
“The debtors’ case storyline is a carbon copy of the same business plan and strategy the debtors peddled to the lenders when the Working Capital Loan was advanced in January 2019,” the objection noted.
Lapis wanted the court to assert restrictions and terms on the JMB loan, stating it’s priced at more than 20 percent annual interest, and matures in December. Those conditions concern Lapis, which asserts a disbelief in Astria’s ability to properly restructure and come out of the Chapter 11 bankruptcy in a timely manner.
Lapis further contends there have been a number of problems plaguing the hospital system from the onset, including the already tenuous financial conditions the Toppenish and Yakima hospitals were experiencing prior to being purchased in 2017.
The objection states Lapis believes the transition from the billing and collections system blamed for the financial crisis to a new system will hinder the hospital system just as the last transition did.
Another concern is management turnover, which is also cited in the bankruptcy documents.
A meeting of creditors is scheduled June 20 at the Red Lion Hotel in Yakima.