Hospital bankruptcy settlement on the brink of collapse as Hoboken council asked to bond $10M to pay creditors

At what is a key moment in the ongoing sale of the only city-owned hospital in the state, the Hoboken City Council – until now sidelined in the process by Mayor Dawn Zimmer – is being asked to support a $10 million to $12 million bond issuance to pay off debts of the hospital manager.

Hudson Healthcare Inc., the non-profit manager of Hoboken University Medical Center (HUMC), has filed for bankruptcy for over $30 million in unpaid bills. The settlement negotiations yesterday were unfruitful and, through backchannels, City Council President Beth Mason was asked to support a bond ordinance that would allow for a settlement.

Mason, who has been critical of the “secrecy” surrounding the sale of the hospital, offered to support the bonding with four stipulations of her own – an offer that was flatly refused.

“The question came back: Would you be willing to negotiate…if there was a need for a bond? (I said) depending on the terms, absolutely,” she said. “I believe we should have a hospital in Hoboken. But the buyer can’t turn around and flip (the real estate), and that’s right now what’s being laid out on the table.”

Mason asked for four things: 1. a deed restriction to protect against flipping the valuable midtown property and turning it into high-rise condos; 2. a re-examination of the tax abatement on the property since the non-profit hospital is being bought by a for-profit company; 3. public release of all bids received by the hospital authority in the sale and all bankruptcy related depositions given by agents of the city; and 4. proof that a $20 million investment promised by the buyers was actually ready to be invested.

“The taxpayer is going to be on the hook for additional funds, they have a right to know what got them there,” she said.

Mason wasn’t given specifics as to which of her requests were objectionable to the parties at the negotiating table; she was just told, “No.”

Meanwhile, the bankruptcy judge yesterday postponed the hearing on Hudson Healthcare’s filing from Wednesday to Thursday, but last night, at least one of the creditors, PSE&G, reportedly broke from the committee of vendors seeking redress and filed an objection to the bankruptcy for the $5 million the utility company is owed by the hospital.

The offer on the table yesterday, according to a source, was for the city to provide $10 million to $12 million to settle a more than $30 million debt of the hospital manager. To this point, stakeholders in the sale had differing opinions on whether the city could be held liable for the debt of the non-profit manager and hospital authority.

The City Council even recently forgave $3 million from the hospital manager that, according to a city attorney, was partially in exchange for protection against creditors.

Mason said it’s her understanding that the buyer, HUMC Holdco, has been asked to put up only $1 million for the $90 million deal. 

“There’s a lot of people who would have put up $1 million for $90 million in property,” she said.

In a deal to sell the city garage, she said, the buyers were asked for $2.5 million upfront for a $25 million deal.

“Where’s the logic? All of this has been done in secrecy,” she said. “This is a public agency; all of this should have been done in public.”

A spokesman for the city did not immediately respond to a call for comment. Hospital bankruptcy settlement on the brink of collapse as Hoboken council asked to bond $10M to pay creditors