Presbyterian Intercommunity Hospital (PIH) and Downey Regional Medical Center (DRMC) today announced they had each signed a non-binding letter of intent with plans to execute a definitive agreement calling for PIH's acquisition of DRMC. This will bring together two not-for-profit hospitals both with long standing histories of being dedicated to providing quality care to the communities they serve. The nonbinding letter of intent would allow for the continuation of a nonprofit hospital serving the greater Downey community.
Under the proposed structure, PIH would form a nonprofit entity to acquire the assets of DRMC under a plan of reorganization. Consideration for the asset purchase would be the promise of the nonprofit hospital to make payments to general unsecured creditors according to a proposed schedule. The outstanding bonds of DRMC could either be guaranteed by PIH or an appropriate affiliate, or possibly be assumed into the PIH Obligated Group.
"Now that the letter of intent is signed, PIH and DRMC can begin the process of creating an integrated regional healthcare system with many benefits for residents of the greater Southeast Los Angeles County region serviced by the two hospitals," said James R. West, President and Chief Executive Officer of PIH. "By working with the management and physicians at DRMC, the two hospitals will be able to create a comprehensive network of healthcare services that will be unsurpassed in the area."
"We are hopeful that we can quickly come to terms under a definitive asset purchase agreement with PIH and allow for the new nonprofit Downey-based hospital to commence operations as early as this summer, as previously planned," stated Rob Fuller, Executive Vice President & COO of Downey Regional. "While this letter of intent is nonbinding and preliminary in nature, there is a natural geographic and operational affinity between the two organizations that should allow for the Downey-based nonprofit hospital to enjoy successful hospital operations from the outset once the asset purchase agreement is concluded," said Fuller.
DRMC filed for protection under Chapter 11 of the U.S. Bankruptcy Code on September 14, 2009, citing financial systems breakdowns and poor contracts as its reasons for filing. DRMC has operated at normal capacity with its full range of services, including its very busy emergency room, throughout the proceedings, and continues to provide excellent care to its patients. On March 15, 2010, DRMC announced that discussions with the Daughters of Charity Health System had ended.
"Our overall plan in these discussions is to execute a strategic transaction that allows for a Downey-based nonprofit hospital to continue providing superior healthcare services to patients in the community," said Kenneth Strople, DRMC's President and Chief Executive Officer. "I want to reassure our patients, our employees, the physicians, and the community that DRMC and its services will continue to be open as we move through these discussions," added Strople.
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