Astria Health is working to secure a $75 million loan from Tacoma-based MultiCare Health Systems, a last-minute move that attorneys said is a potential game-changer in its ongoing bankruptcy protection case.
During a status conference Thursday, Astria Health attorney Sam Maizel said the Tacoma-based nonprofit health care system told him earlier this week that it would be able to extend a $75 million secured loan.
Astria Health would use the $75 million, along with an additional $5 million of its funds, to pay off its largest creditor, Lapis Advisers. That includes approximately $44 million in financing it owed Lapis Advisers when the organization filed for bankruptcy protection in May 2019 and $38 million in debtor-in-possession financing extended to Astria Health in December 2019.
“This would provide a firm financial footing, which would be of immense value to the community,” Maizel said.
MultiCare started talks with Astria Health and Lapis Advisers several weeks ago. A deal came together until earlier this week, just days before a hearing for confirmation of its reorganization plan.
“MultiCare, for its part, has made Herculean efforts to get here,” Maizel said.
MultiCare is a large nonprofit organization with 10 hospitals and a network of clinics throughout the Spokane and Puget Sound areas.
In an emailed statement, Anna Agnew, MultiCare’s director of external communications, said extending financing aligned with its mission to partner with other organizations to “ensure that communities in the Pacific Northwest have appropriate access to health care services and a vibrant and stable system of health.”
“To this end, we have offered to provide Astria Health with a secured loan of $75 million to facilitate their successful exit from bankruptcy so they can continue to care for the people and counties they serve,” Agnew said. “If the bankruptcy court approves MultiCare’s proposal, we would be pleased to assist Astria in their bankruptcy process and to support them in their work to build a healthy community in Central Washington.”
Since filing for bankruptcy protection, Astria has closed several of its operations, including the Astria Regional Medical Center in Yakima and several clinics. The closure left Yakima with one hospital, Virginia Mason Memorial. Astria Health continues to operate hospitals in Sunnyside and Toppenish.
The reorganization plan will have to be amended again to include the financing deal with MultiCare. Maizel said he planned to file the new plan by the end of the day Friday.
MultiCare would have until Jan. 15 to fund the loan and pay Lapis Advisers off. If that does not occur, the previous version of Astria Health’s reorganization plan will be effective the following day, Maizel said. Under that plan, Astria Health would pay back Lapis Advisers over time.
Astria Health issued an emailed statement: “Either plan will well position Astria Health to move forward and exit bankruptcy.”
Attorneys for MultiCare said during the status conference Thursday the $75 million is already in an escrow account.
Judge Whitman L. Holt proceeded with part of the confirmation hearing Friday, addressing objections from the U.S. Trustee regarding the reorganization plan. Holt overruled those objections, which included concerns over Astria Health’s plan to consolidate the 13 debtor entities involved with the bankruptcy protection process into one entity to respond to claims.
The hearing will continue Monday with Holt addressing any objections to the newly amended plan, which will take into account the MultiCare financing deal.
MultiCare is no stranger to the Yakima Valley and Central Washington. A year ago, MultiCare launched a decade-long partnership with Pacific Northwest University of Health Sciences to improve health care in rural communities in Washington state. Under the partnership, PNWU would have access to additional clinical work at MultiCare hospitals and clinics and MultiCare clinicians would offer expertise to students.