ALLEGHENY: Tenet Bid Tops Vanguard
Tenet Health Corp. has submitted a $465 million bid for Allegheny Health Education and Research Foundation's (AHREF) eight bankrupt Philadelphia-area hospitals, trumping the previous bid from Vanguard Health Systems by $5 million. The Philadelphia Inquirer reports that according to Tenet officials, the bid surpasses Vanguard's offer not only financially, but would also provide "more funding to assist Allegheny University of the Health Sciences in a transition to an independent institution," by giving it $30 million in the first 90 days following a sale. Vanguard's bid stipulated $20 million in assistance in the first 60 days. A spokesperson for Vanguard, whose bid didn't preclude other deals, said, "We're certainly not surprised to see a definitive bid from Tenet. We'll just have to see what happens in the Bankruptcy Court." A bankruptcy judge will make the final determination of which deal is better for Allegheny (Gerlin, 8/13).
Show Us The Money
Allegheny's numerous creditors have petitioned bankruptcy Judge Bruce McCollough "to slow down AHREF's proposed timetable for selling the hospitals," in which the hospitals would be auctioned off on September 14. Creditors allege that the numerous restrictions on bidding for the hospitals -- which include surpassing Vanguard's offer by at least $7.5 million and either buying "all eight of the hospitals or for either of two groups" -- "could result in a 'chilling effect on competitive bidding and, ultimately, a failure to realize the best possible results in the sale process.'" The Pittsburgh Post-Gazette reports that a group of creditors stated that "Tenet has made its offer 'on what appears to be materially better terms and conditions than those set forth in the Vanguard proposal.'" AHREF bankruptcy attorney Philip Beard said, "The creditors and the debtor really have the same objective -- to sell these properties at the earliest possible date for the best possible price" (Gaynor, 8/13).
Pennies On The Dollar
In two additional articles, the Post-Gazette reports that creditors will likely never see a large portion of Allegheny's estimated $1.1 billion debt. Even "[u]nder a best-case scenario," AHREF's creditors will only "get back about $597 million -- or roughly 54 cents on the dollar. A worst-case scenario puts the payback at about 32 cents on the dollar." Unhappy and unpaid creditors "are likely to go after [Pittsburgh's] Allegheny General and its local brethren," which "are far better off financially and have much deeper pockets than their [Philadelphia] cousins" (Massey, 8/13). In what is perhaps the first volley of that battle, the parent company of HealthAmerica of Pennsylvania yesterday "filed a $108 million lawsuit against Allegheny General and three related Western Pennsylvania health care institutions" in an attempt to compel "the hospitals to fulfill their contractual obligations to provide health care services to HealthAmerica's 290,000 members in Western Pennsylvania." AHERF, which has tried "to shield all four of the institutions named in the suit from its massive bankruptcy case," was "surprised by the news release 'since none of the institutions named owe HealthAmerica money,'" according to spokesperson Tom Chakurda (Pittsbugh Post-Gazette, Gaynor, 8/13). Click here to see a list of AHREF creditors.