Vancouver Coastal Health Authority (VCH) has made a stalking horse bid for Seymour Health Centre Inc. that could be worth around $11.5 million.
The stalking horse bid sets a floor price for the assets of the company behind VCH’s City Centre and North Vancouver urgent and primary care centres.
The Sept. 14 application from court-appointed receiver Ernst and Young proposed soliciting offers for the entire business or each of its five segments, with a goal of closing a deal by March 1.
“The stalking horse bid will provide certainty that the clinics will be able to continue operating with minimal disruption,” said the application. “The receiver is of the view that the stalking horse offer and the proposed sale procedure will result in a greater recovery to VCH and the other creditors than other methods of sale.”
Seymour Health owed VCH at least $6.8 million as of May, when it defaulted on a loan. B.C. Supreme Court appointed Ernst and Young on June 26.
Justice Shelley Fitzpatrick heard lawyers for the health board, company and receiver on Tuesday afternoon and approved Ernst and Young’s proposed sales and solicitation process.
According to Ernst and Young’s first report to the court, dated Sept. 13, VCH made the bid to acquire all of the business segments as an asset purchase for $6.8 million, bidding its secured debt as a credit, less $280,960 for medical equipment. Virtually all of Seymour Health’s staff would be retained to work at its three clinics, along with a diagnostic imaging lab and Burnaby sleep lab license.
“Accordingly, the final value of the credit bid, while not yet known, is contemplated to be approximately $11.5 million if the receiver’s borrowing charge is fully borrowed, calculated on a draft and preliminary basis, and is conditional on the approval [of the court],” said the Ernst and Young report.
The cashflow forecast from Sept. 4, 2023 to March 3, 2024 in the receiver’s report contemplates $3.05 million in receipts and $7.123 million in disbursements. After the receiver’s borrowing of $3.5 million, it would leave a $32,638 cash balance.
Fitzpatrick also agreed to Ernst and Young’s request to increase the receiver’s charge from $2.5 million to a maximum $5 million.
“It’s clear that the operations are operating at a loss and they need to be covered, one way or another,” Fitzpatrick said.
Seymour Health’s Sept. 18 reply said the company had not enough time to prepare a full response to the application, but took issue with the proposed orders, including the VCH stalking horse bid.
The receiver’s report said Seymour Health’s problems began around July 2019 due to an inability to generate positive cash flows to meet obligations. In May 2022, it closed a $10 million equity investment from BDC based upon a $30 million enterprise valuation. That resulted in BDC owning one-third of shares in the parent company of Seymour Health. A numbered company owned equally by Gurasahib Binning and Sandeep Kaur Parmar holds the remaining two-thirds.
Despite the transaction, Seymour Health continued to have difficulty paying doctors, staff and medical suppliers. In June 2022, VCH agreed to loan Seymour Health to carry on its operations, but Seymour defaulted almost a year later.
Ernst and Young’s report said that it learned, immediately upon appointment, that Seymour Health laid-off 37 employees on June 21, including 17 technicians, assistants and licensed nurses located at the City Centre clinic and eight x-ray technicians and one ultrasound technician at City Centre and North Vancouver.
The clinics, a major initiative of the NDP government, were critically understaffed and would have to either close on weekends, reduce operating hours or a combination of both in order to maintain staffing efficiency, the report said.
“The closures and/or reduced hours of operation would compromise and adversely affect the quality of health care provided by the clinics.”
Ernst and Young contacted the laid-off employees to rescind their pink-slips and retained 32 of them. Seymour Health has seen a net increase of five physicians since the receivership date, with an additional seven anticipated to join in January.
“Since its appointment, the receiver has maintained open and clear lines of communication with the Seymour staff, including: attending monthly departmental head meetings, attending bi-monthly physician meetings, holding weekly calls with Seymour’s medical directors, and created a dedicated email for Seymour staff, responding diligently to all questions posed.”
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