Nearly half of Santa Ana hospital operator Integrated Healthcare Holdings Inc. soon could be up for auction, according to court records.
A receiver for Medical Capital Holdings Inc. of Tustin,an Integrated lender and investor,said he’s reached a tentative deal to sell its Integrated stake for about $55 million.
Thomas Seaman of Irvine-based Thomas Seaman Co. said in a court filing that he could issue a letter of intent to sell the stake “in the next few days.”
If the parties in Medical Capital’s receivership case agree, he said he would file a motion seeking court approval to sell the financier’s stake using an auction known as an overbid procedure.
Seaman didn’t return calls for comment.
Federal Judge David Carter shut down Medical Capital in August after the Securities and Exchange Commission filed a fraud lawsuit against it. The judge appointed Seaman as the company’s receiver.
Medical Capital unit Healthcare Financial Management and Acquisitions Inc. held 145.8 million Integrated shares, or about 42%, as of the end of February, according to a SEC filing.
Who might bid for the Integrated stake is unclear.
Kenneth Westbrook, Integrated’s chief executive, declined an interview request.
Integrated owns Western Medical Center-Anaheim, Western Medical Center-Santa Ana, Coastal Communities Hospital in Santa Ana and Chapman Medical Center in Orange.
Integrated bought the hospitals for $70 million in 2005 from Dallas-based Tenet Healthcare Corp.
The company’s hospitals make up about 12% of Orange County’s hospital beds.
Stock Breakdown
Kali P. Chaudhuri, a Riverside doctor and medical entrepreneur, is Integrated’s majority shareholder. He holds about 60% of the shares, including warrants giving him the right to acquire more stock.
William Thomas, an Integrated director and Chaudhuri’s lawyer, couldn’t be reached for comment on whether Chaudhuri plans to bid on the Medical Capital stake.
Orange County Physicians Investment Network LLC, a group of doctors working at Integrated hospitals, owns about 30% of the company.
(Warrants to buy Integrated stock bring the stakes of Chaudhuri, Orange County Physicians Investment Network and Medical Capital to more than 100% as the groups claim some of the same shares.)
Medical Capital also is seeking to sell its Integrated debt to unnamed Wall Street investors, according to Seaman.
He said in court papers he’s received inquiries from potential investors that want to buy a $45 million real estate loan made to Integrated.
Medical Capital acquired accounts receivable at a discount from Integrated and other healthcare providers and then sought to collect on the debts.
Earlier this year, Medical Capital defaulted on a $12.7 million financing commitment to Integrated. The hospital operator owes Medi-cal Capital some $81 million in long-term loans. It relied on the company for short-term financing.
Integrated has a court motion pending that seeks to allow it to sue Medical Capital for breach of contract and other claims.
Medical Capital’s executives have pushed for converting its receivership into a bankruptcy, which would complicate litigation.
Integrated’s relationship with Medical Capital came under fire last year from its shareholder doctors who were involved
in litigation against the company and former Chief Executive Bruce Mogel over allegations of fraud.
The doctors contended that Integrated’s financing deal with Medical Capital was “oppressive” and at “outrageous rates,” according to their litigation.
Integrated settled with Orange County Physicians Investment Network in April, agreeing to pay $2.7 million to resolve nine lawsuits. Mogel’s departure in November 2008 led to the settlement, lawyers for the doctors said in published reports.
