Temple University Health System and its partners have agreed to pay financially beleaguered Tower Health $28 million for Chestnut Hill Hospital, Tower said in a regulatory filing late Tuesday.
Tower, which is based in West Reading and anchored by Reading Hospital, disclosed the price publicly for the first time in a document that explains the concessions Tower has agreed to in its bid to win bondholder approval for the sale, which was announced in August.
Bondholders have until Nov. 18 to approve the sale, which Tower hopes to complete the sale by Dec. 13 at the latest, the document says. Temple’s partners are Redeemer Health and Philadelphia College of Osteopathic Medicine. Temple is slated to manage the 148-bed facility, which had 827 employees in August.
» READ MORE: Temple Health and partners agree to buy Chestnut Hill Hospital from Tower Health
The largest holders of Tower’s debt are TIAA-CREF with 26%, Lord Abbett & Co. LLC with 17%, and Massachusetts Financial Services with 13%, according to data provided last week by Bloomberg News. Those three firms own more than half of the $1.2 billion in bond debt at issue, which means their approval would allow the deal to go through.
If bondholders agree to the sale of Chestnut Hill Hospital, Tower will provide monthly — instead of quarterly — investor updates on its financial condition, which has been deteriorating for years, but at an accelerated pace since the coronavirus pandemic struck.
Tower reported in August that it had enough cash at the end of June to keep running for just 54 days without any new revenue, an extraordinarily low number for a system with more than $2 billion in annual revenue and its heavy debt load.
» READ MORE: Tower Health’s cash reserves are extremely low, sinking by $331 million over the last 12 months
That figure likely dropped over the summer, when hospitals across the nation, buffeted by inflation and lower patient volumes, suffered widespread losses. Tower is expected to report its financial results for July, August, and September late this month.
In its filing Tuesday, Tower said the sale of Chestnut Hill would have two financial benefits.
The $28 million in cash from the sale would add five days to its cash reserves. In addition, eliminating the losses at Chestnut Hill – a total of $11.1 million from January through August – would add another five days of cash, Tower said.
Tower started the pandemic in a deep hole. Its previous chief executive, Clint Matthews, spearheaded an expensive and money-losing expansion from 2017 to 2019 into Southeastern Pennsylvania with acquisition of five community hospitals, a chain of urgent-care centers, and St. Christopher’s Hospital for Children in a joint venture with Drexel University.
Two of the acquired hospitals, Brandywine and Jennersville, have since closed. The two others are Phoenixville Hospital and Pottstown Hospital. Tower has also been trying to sell many of its urgent care centers.
Tower’s sale agreement with Temple and its partners acknowledges the precariousness of Tower’s financial condition.
If Tower files for bankruptcy protection before the Chestnut Hill sale is completed, Tower has agreed to seek court permission to pay Temple a $1 million break-up fee and up to $500,000 in expenses.