Business Services Industry

Prospect Medical Holdings Acquires Majority Ownership in Highly Regarded Brotman Medical Center

Business Wire, April 14, 2009

420-Bed Hospital Emerges from Bankruptcy With a Successful Reorganization Driven by New Leadership of Prospect Medical Holdings;

Positioned to Continue Serving Culver City and West Los Angeles Areas With Quality Healthcare and Solid Financial Footing

Highlights

  • Brotman, a former Tenet Health System hospital, emerges from 18-month bankruptcy proceeding New Prospect management, Brotman physicians, nursing staff, executives, and employees work together to execute successful facility improvement and financial turnaround After several years of significant operating losses, Brotman operating profitably for nearly 18 months, after non-recurring restructuring costs Hospital census data and other key metrics improved steadily during the 18-month reorganization period
  • Brotman secured financing commitments of approximately $29.0 million Jewish Home for the Aging (“JHA”) provides approximately $23.0 million Gemino Healthcare Finance, LLC (“Gemino”) provides $6.0 million working capital facility
  • Brotman and the JHA enter into agreement for JHA option to purchase land and construct senior living facility adjacent to Hospital
  • Prospect increases ownership in Brotman from 33% to 72% with Prospect consolidating financials, as an acquisition that is expected to be accretive

LOS ANGELES -- Prospect Medical Holdings, Inc. (NYSE Amex: PZZ) (“Prospect” or “the Company”) today announced that Brotman Medical Center, Inc. (“Brotman”) officially exited from Chapter 11 Bankruptcy Protection on April 14, 2009, and that the Company has increased its ownership in Brotman from approximately 33% to approximately 72%. In exchange for its increased interest, Prospect made an additional investment of $1.8 million, and anticipates making a further investment of $0.7 million within six months. Four existing shareholders of Brotman own the remaining 28%.

Brotman’s emergence from bankruptcy and Prospect’s majority ownership in the facility evidence the institution’s successful reorganization and its improved standing as a financially strong, well-run and needed hospital in the Culver City and West Los Angeles communities.

Founded in 1924 and based in Culver City, California, Brotman is a 420-bed acute care hospital that offers a wide range of inpatient and outpatient acute care services, including a 24-hour emergency room, rehabilitation, psychiatric care and chemical dependency services. Following several years of significant operating losses, Brotman voluntarily filed for Chapter 11 Bankruptcy Protection in October 2007. Prospect’s new Hospital Services segment, through the purchase of Alta Healthcare System, Inc., was then engaged to help return Brotman to operational profitability and will continue this process going forward.

Brotman Receives Commitments of Approximately $29.0 Million in Financing Facilities

As part of its Plan of Reorganization, Brotman obtained a commitment from Gemino Healthcare Finance, LLC for a three-year, $6.0 million, senior credit facility secured by accounts receivable at an interest rate of LIBOR plus 7% per annum. In addition, the Los Angeles Jewish Home for the Aging (“JHA”) provided an aggregate of approximately $23.0 million in financing through a $16.0 million loan with a two-year term and a $6.25 million loan with a three-year term. The entire financing is secured by real estate and personal property. The interest rate on the $16.0 million loan is 10.0% per annum during the first year of the loan and 7.5% thereafter. Under the $6.25 million loan, the interest rate is 10% per annum during the life of the loan. The proceeds of the JHA loans were used to repay all existing senior secured loans at Brotman, including Debtor-In-Possession financing. Prospect has not guaranteed any portion of the Gemino or JHA financing.

JHA Granted Option to Purchase Brotman-Owned Land and Construct New Senior Living Facility

As part of the JHA financing, Brotman has granted JHA an option to purchase, for cancellation of $16 million of debt, certain Brotman-owned land adjacent to the hospital, where JHA plans to construct a senior living facility.

Founded in 1912, the JHA is one of the foremost continuing senior living facilities in the United States and is the largest single-source provider of senior housing in Los Angeles. In total, the JHA annually serves more than 1,700 seniors through an extraordinary continuum of services, including in-residence housing on two village campuses (spanning 16 acres), with services featuring independent-living "Neighborhood Home" accommodations, residential care, skilled nursing care, Alzheimer's disease and dementia care, and end-of-life care.


 

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