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In this file photo from Wednesday, Jan. 8, 2020, Astria Regional Medical Center is pictured in Yakima, Wash.

Astria Health will reorganize instead of selling its assets.

Attorneys for Astria Health filed a notice in U.S. Bankruptcy Court to cancel all bidding deadlines, essentially ending efforts to sell assets. Sam Maizel, attorney for Astria Health, said the organization is now working closely with Lapis Advisers on a joint reorganization plan that is expected to be ready before a June 1 deadline.

The decision follows a meeting of officials from Astria Health and Lapis Advisers in San Francisco in early March.

“Based on the impact of the COVID-19 pandemic on the capital markets … the Debtors, in consultation with representatives of Lapis Advisers, L.P. (“Lapis”), have concluded that a sale process is not a viable exit strategy for the Debtors at this time,” Maizel wrote in the notice, which was filed Friday.

Astria Health’s notice ends a dual-track process that started last fall. When the organization initially filed for bankruptcy protection last May, the nonprofit organization said it did not want to sell, but focus on reorganization by securing financing and negotiating with creditors. Back then, the organization said it was forced to file for bankruptcy after a previous vendor was unable to collect revenue and impacted the organization’s cash flow.

However, by fall, Astria Health started pursuing a concurrent path of selling assets as a way to satisfy creditors if the organization was not able to secure refinancing.

Several events in the last several months changed Astria Health’s course.

Lapis Advisers, Astria Health’s largest creditor pre-bankruptcy, became its debtor-in-possession lender. Astria Health had initially received $36 million in debtor-in-possession lending from JMB Capital Markets Lending. When the loan was to mature at the end of last year, Astria Health received court approval in December to secure financing from Lapis Advisers to pay off the loan and to help cover operations costs in January.

In January, Astria Health closed Astria Regional Medical Center in Yakima, stating that it no longer had the financial means to keep operating the hospital. Officials said they could not find a buyer who would be interested in the Yakima hospital, and continuing to operate the facility hurt Astria’s ability to secure exit financing.

Astria Health still runs Astria Toppenish and Astria Sunnyside hospitals as well as a network of clinics throughout the Yakima Valley.

Astria Health continued on a dual path in the first quarter of 2020 and had planned to start accepting bids in the middle of this month. But the COVID-19 outbreak changed those plans.

A month ago, the state started leasing the Astria Regional facility as part of its coronavirus response. State officials have held off on reopening the hospital, instead sending staff to respond to outbreaks at long-term care facilities.

The state plans to end its lease with Astria Health on May 11. Gov. Jay Inslee, however, said recently that the use of Astria Regional in the state’s coronavirus response was still a possible option.

Nurses union ruling

Meanwhile, a modified version of a complaint from the Washington State Nurses Association will continue proceedings in the U.S. Bankruptcy Court’s Eastern District of Washington.

The union, which represented nurses at Astria Regional and Astria Toppenish Hospital, argued that when Astria Health closed Astria Regional, it violated several state and federal laws. Attorneys for the union argued that Astria Regional violated the federal WARN Act by not abiding by the 60-day notice the law requires. WSNA also asserted Astria violated the Washington State Payment and Collection Act and the Washington Wage Rebate Act by not quickly paying the nurses for paid time off.

Astria Health filed a motion to dismiss the complaint last month.

Judge Whitman L. Holt ruled on April 21 to continue proceedings on whether Astria Regional has violated the WARN Act but dismissed the part of the complaint related to state law violations.

The ruling came after both sides made arguments during a hearing on April 15. Holt made his ruling during a telephonic hearing.

Regarding the WARN Act aspect of the complaint, Astria Health argued for dismissal because Astria Health and SHC Medical Center-Yakima, the business entity for Astria Regional Medical Center, wasn’t an “employer” that was liable under the WARN Act because it was liquidating itself due to its inability to secure financing or a buyer to continue operations.

Holt said he wasn’t ruling for or against that assertion, but he felt a summary judgment after a period of discovery was appropriate.

“That might be where we end up, but it will have to be through a more appropriate process that builds a record on which I could appropriately base a ruling on the standards applicable at that stage of the litigation,” Holt said.

Holt agreed with Astria Health that there are good-faith disagreements over the interpretation of the collective bargaining agreement between WSNA and Astria Health.

Holt said that he could dismiss that aspect of the complaint based on the Labor Management Relations Act, which states federal law preempts state law if claims are dependent on analysis or interpretation of a collective bargaining agreement.

Under a proposed order filed by Astria Health, a period of discovery would continue until Aug. 4 with a deadline for summary judgment to follow on Aug. 18.

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Reach Mai Hoang at maihoang@yakimaherald.com or Twitter @maiphoang