Corona Calif.-based KPC Group missed the court-appointed deadline to purchase four hospitals from El Segundo, Calif.-based Verity Health, which entered Chapter 11 bankruptcy in August 2018.
KPC Group bid $610 million in January to purchase the four hospitals from Verity. Three months later, U.S. Bankruptcy Judge Ernest M. Robles approved the asset purchase agreement for KPC's Strategic Global Management to acquire the hospitals. In late November, the judge ordered SGM to close the deal by Dec. 5.
After SGM failed to complete the purchase by the court-appointed deadline, Verity asked the court to issue an order requiring SGM's principals to testify as to why the deal did not close and whether SGM has the financial ability to close the sale. Verity also asked the court to issue an order finding SGM in breach of the asset purchase agreement and allowing it to keep SGM's $30 million deposit and proceed with other plans to sell the hospitals.
On Dec. 9, the court denied Verity's request to force SGM's executives to appear and testify in court.
"By failing to close, SGM risks the loss of its $30 million good-faith deposit as well as the possibility of damages for breach of contract in an amount of up to $60 million," Judge Robles wrote in a Dec. 9 court filing. "Being compelled to offer testimony will not motivate SGM to close where the threat of the loss of up to $90 million has failed to accomplish that end."
The judge assured Verity that it would have the chance to litigate the issues of whether SGM breached the asset purchase agreement and whether it's entitled to keep the good-faith deposit.
Though neither party has terminated the sale process, the judge said Verity can "explore options for the alternative disposition of the hospitals" without violating the asset purchase agreement.
The next bankruptcy court hearing is slated for Dec. 30.
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