City Needs to Bond Before Hospital Sale Can Go Through

Before the Hoboken University Medical Center can be sold to private owner HUMC Holdco LLC, the city council will have to approve a bond for millions of dollars to settle a bankruptcy dispute between the hospital and its creditors, according to sources close to the hospital negotiations.

In a memo to the city council, Mayor Dawn Zimmer proposed a $5 million bond ordinance.

A hearing in U.S. Bankruptcy Court in Newark that was initially scheduled for Wednesday has been postponed until Thursday, according to a source with knowledge of the negotiations, after the parties involved couldn't come to an agreement.

According to the source, Holdco—the proposed buyer of the hospital—is willing to put up $5 million to settle the creditors' debt. The total debt is roughly $35 million.

The creditors, however, want roughly $15 million, sources said. The difference, which comes down to roughly $10 million, will have to come from the city. One of the creditors that is objecting to the settlement is PSE&G, sources said.

The hospital's management company Before the sale of HUMC—which is currently still in the hands of a municipal hospital board—, the bankruptcy has to be settled.

If the sale doesn't go through, the hospital will close, Zimmer has said. In that case, the city will be on the hook for a $52, the amount it bonded for years ago when it saved the hospital from closing. A closing of the hospital—Hoboken's largest employer—will also mean that about 1,100 jobs will be lost.

In order to pass a bond, the city council needs a 6-vote super majority. This means that the mayor, who is allied with the five-member council majority, has to convince a member of the minority to vote with her and approve the bond.

Zimmer and Hospital Authority Chairwoman Toni Tomarazzo gave a presentation about the bond that will go in front of the city council if a bankruptcy settlement between the hospital and its creditors isn't approved, to the Hoboken Women's Auxiliary on Monday night.

Tomarazzo didn't return multiple requests for comment.

"If either no bond ordinance receives six votes on first reading, or if the amount approved is ultimately not sufficient to reach an agreement then the hospital will be forced to close," Zimmer wrote,
"most probably by the end of October."

Councilwoman Beth Mason, who could end up being the swing vote in the matter, said that she will approve the bond, but has set certain conditions.

Mason said she wants to see a seven year deed restriction, to secure that the site will remain a hospital. This is also part of the purchase agreement between the hospital authority and Holdco.

Councilman Ravi Bhalla called this resolution—which is also up for a vote on Wednesday—a "poison pill" during a previous meeting.

Mason also said she wants the process to be more transparent, and is asking the mayor and the hospital authority to release the depositions that were taken last week about the bankruptcy.

Mason said also she wants a firmer commitment from the buyer that $20 million will be invested in capital improvements in and around the hospital, which it has promised to do.

"I think that if the public is put on the hook for more money," Mason said, "they have a right to know why they're in this position."