Pacifica of the Valley Corporation - Chapter 11 Bidding Procedures Summary

Bidding Procedures / Asset Purchase Agreement Summary

Overview

• Pacifica of the Valley Corporation, which operates the 231-bed Pacifica Hospital of the Valley safety-net facility in Sun Valley, Calif., moved on Sept. 10, 2026 for approval of an auction format and bidding procedures for substantially all of its assets and for a later order authorizing the sale free and clear, with no stalking horse identified and none required.
• The debtor filed Chapter 11 on July 4, 2026 and, citing the liquidity constraints described in the first-day declaration of Precious Mayes, determined together with the special restructuring committee of the board that a sale of the purchased assets, rather than another restructuring option, is in the best interest of the estate, patients, and stakeholders and will yield maximum value; the debtor states the procedures are also designed to ensure continuity of culturally competent care under a new operator.
• The hospital serves 13 zip codes and takes subacute patient referrals from hospitals more than 400 miles away, offering 24/7 emergency, acute care, ICU, locked behavioral health, distinct-part subacute skilled nursing, outpatient surgery and rehab, and inpatient and outpatient ancillary services.
• The motion attaches a proposed bidding procedures order; the sale notice and cure notice exhibits state that the court approved the bidding procedures at a hearing on Sept. 29, 2026 and will enter the order, a forward-looking recital drafted for service after entry rather than a record of an entered order.

Parties Involved

• Seller: Pacifica of the Valley Corporation d/b/a Pacifica Hospital of the Valley, the sole debtor in this Chapter 11 case in the U.S. Bankruptcy Court for the District of Delaware.
• Purchaser: to be determined at auction; no stalking horse bidder has been designated, and the debtor may proceed with a "naked" auction.
• Peter Chadwick of Berkeley Research Group serves as chief restructuring officer; the debtor applied on Aug. 21, 2026 to retain Houlihan Lokey Capital as investment banker, which hosts the data room and markets the assets.
• The U.S. Trustee appointed an official committee of unsecured creditors on July 20, 2026, and the committee holds consultation rights over nearly every discretionary determination in the process, including qualification of bids, stalking horse designation, selection of the opening bid, and selection of the winning and back-up bids.

Assets Being Sold

• Substantially all of the debtor's assets, defined as any and all tangible and intangible real and personal property assets of the debtor as set forth in the draft asset purchase agreement, together with the assignment and assumption of designated executory contracts and unexpired leases and payment of the associated cure costs.
• The debtor will post the form asset purchase agreement in the Houlihan Lokey-hosted data room no later than Oct. 1, 2026; the purchased assets are defined there, and the motion itself carries no asset-by-asset schedule.
• The debtor may elect, in consultation with the committee, to carve any assets out of the sale and dispose of them by private or public sale, subject to court approval of the alternative method.
• The assets transfer on an "as is, where is" basis with all faults and without representations or warranties of any kind except as explicitly set forth in the winning bidder's executed agreement; the debtor makes no representation as to diligence information provided outside that agreement, and no bidder may conduct further diligence after the bid deadline.

Bid Protections

• Break-up fee and expense reimbursement: none awarded to date; if the debtor later designates a stalking horse, the two together may not exceed 2.5% of that bidder's proposed purchase price in the aggregate.
• The debtor may designate any qualified bidder that indicated a willingness to serve as stalking horse at any time up to 24 hours before the auction begins, after consultation with the committee, and award the protections without further notice or court order other than filing a notice on the docket by that same 24-hour mark; the debtor has no obligation to designate anyone, and if it does, it must notify all other potential bidders.
• Any break-up fee is payable only from cash sale proceeds received at closing of a sale or transfer of the assets to a party other than the stalking horse, never earlier than consummation, and only where the debtor previously determined in consultation with the committee that the bid merited stalking horse status. In a naked auction, no break-up fee is paid.
• A stalking horse bidder that overbids at the auction may credit the amount of its break-up fee toward its bid when measuring whether it has topped the prior bid by the required increment.

Bid Requirements

• Only qualified bidders may participate in the auction. A party first becomes a potential bidder by executing a nondisclosure agreement satisfactory to the debtor and submitting financial information (bank statements, current balance sheet, income statement, audited financials, or similar) evidencing its ability to close, which the debtor shares with the committee's professionals on request; the debtor may withhold confidential information and data room access from any party that has not established, or has raised doubt about, its good faith and capacity to close, and must give the committee's professionals data room access on a professional-eyes-only basis; failure to comply with reasonable diligence requests is a basis to bar the party from the auction or to refuse to qualify its bid.
• At the debtor's option, after consultation with the committee, potential bidders may be required to submit an indication of interest covering transaction structure and purchase price, a description of the acquiring entity and its relevant experience, plans for the assets post-closing, evidence of financial capacity to consummate and to operate the assets, evidence of ability to satisfy necessary regulatory approvals, corporate authority, remaining diligence needs, a closing timetable including regulatory approvals, and contact information; failure to submit one is not itself a basis for disqualification.
• To constitute a qualified bid, a bid must, among other requirements:
  • Be received in writing, email sufficient, by the bid deadline by debtor's counsel, the chief restructuring officer, Houlihan Lokey, the U.S. Trustee, and committee counsel, and clearly identify the assets to be purchased; the debtor will not reject a bid solely because the bidder inadvertently failed to serve one of those recipients other than Houlihan Lokey.
  • Constitute an irrevocable, binding offer at a stated purchase price, and remain irrevocable until 48 hours after the conclusion of the sale hearing, or longer if the bidder is selected as winning or back-up bidder.
  • Contain cash consideration of no less than is necessary to satisfy the break-up fee and the debtor's administrative claims, unless the administrative claimant agrees to another form of consideration; the debtor will provide the administrative claim amount to potential bidders no less than three business days before the bid deadline.
  • Be accompanied by a clean, duly executed asset purchase agreement consistent with the draft form, a copy marked against the draft, and a copy of the draft sale order marked to show any modifications; a bid whose agreement differs in any material respect from the draft may be found not to be a qualified bid.
  • Be accompanied by a deposit wired in an amount equal to 10% of the aggregate cash component of the purchase price in certified funds, or such other amount acceptable to the debtor in consultation with the committee.
  • Identify the bidder's legal name, including any direct or indirect equity holders where the bidder is a newly formed acquisition entity, and disclose any relationship or connection with the debtor, its affiliates, current or former officers, directors, creditors, landlords, or investors.
  • Carry no due diligence, financing, or other contingencies other than entry of the sale order and any contingencies set forth in the bidder's own agreement, and be supported by recent bank and financial statements demonstrating the ability to close.
  • Describe in detail how the bidder intends to treat the debtor's current employees and any applicable union contracts, and how it intends to satisfy the regulatory approvals necessary to operate the assets.
  • Agree to close through an interim management agreement, sale/leaseback, and/or other agreements under which the applicable regulatory and other approvals will be obtained after closing.
  • Identify with particularity the executory contracts and unexpired leases to be assumed and assigned, and provide sufficient information on the bidder's ability to give adequate assurance of future performance.
  • Include evidence of final board or governing-body authorization for submission, execution, delivery, and closing, and identify the individuals attending the auction, at least one with authority to make binding overbids.
  • Unless a stalking horse has been identified and disclosed no later than two business days before the bid deadline, state whether the bidder is willing to serve as stalking horse and specify any requested protections, subject to the 2.5% aggregate cap.
  • Include representations that the bidder submits to the bankruptcy court's jurisdiction and waives any jury-trial right as to disputes over the procedures, auction, sale hearing, sale order, or closing; that it completed its diligence and relied solely on its own investigation, with no claim to any expense reimbursement or break-up fee; that it is willing to serve as back-up bidder; that it has not engaged in collusion; and that its financial-ability and adequate-assurance information is true and correct.
• The debtor determines qualification in its reasonable discretion after consulting the committee and must advise each bidder of its status no later than one business day before the auction, filing and serving a notice stating whether multiple qualified bids exist. Receiving only one qualified bid, the debtor may cancel the auction or name that sole bidder the winning bidder.

Deposit

• Amount: 10% of the aggregate cash component of the purchase price, wired at bid submission and held under an escrow agreement acceptable to the debtor; the motion's summary of the bid requirements instead states 10% of the proposed purchase price, and the bidding procedures control.
• Within two business days after the auction, the winning bidder and the back-up bidder must each top up in cash so that its aggregate deposit equals 10% of the purchase price reflected in its final bid.
• The winning or back-up bidder's deposit is credited to the purchase price at closing and forfeited to the debtor if that bidder fails to execute the required definitive documentation or to consummate.
• Deposits of qualified bidders other than the winning and back-up bidders are returned within two business days after the sale hearing concludes; the back-up bidder's deposit is returned within two business days after the earlier of closing with the winning bidder and the outside back-up date. A party determined not to be a qualified bidder gets its deposit back within two business days of that determination.

Credit Bid

• Any holder of a valid, properly perfected prepetition or postpetition security interest in the purchased assets that is not subject to a pending written objection as to validity, extent, or priority may credit bid under section 363(k), except as the court limits for cause, and must submit its credit bid by the bid deadline.
• No credit bid is permitted unless every equal or senior secured creditor in the affected assets consents in writing or the credit bid expressly provides for cash payment at closing sufficient to satisfy those equal and senior interests. A written objection may take the form of a letter to the credit bidder's counsel or a pleading filed with the court.
• A credit bid must be supported by evidence of the basis, amount, and priority of the security interest and, where the secured claim is held in a representative capacity, of the bidder's authority to bid.
• If a credit bid challenge is pending when the auction opens as to the amount, validity, or perfection of the security interest, the credit bidder must bid in cash and pay the purchase price in cash to the extent of the disputed amount into escrow with an agent reasonably acceptable to the debtor, the committee, and the credit bidder, unless the court modifies the requirement. Escrowed funds are returned to a credit bidder that ends up as back-up bidder within two business days after the earlier of closing with the winning bidder and the outside back-up date; a credit bidder that wins leaves the funds in escrow pending a final order resolving the challenge and directing their disposition.
• Disputes over a credit bid challenge, the escrow agreement, or the amount of a credit bid rest in the bankruptcy court's exclusive jurisdiction, with amount disputes to be adjudicated before the auction opens and all parties in interest heard; the escrow agent must consent to that jurisdiction as a condition of appointment. Nothing in the procedures limits any party's right to seek relief regarding a creditor's alleged credit bid rights.

Auction and Overbids

• Minimum overbid increment: $200,000, with bidding opening at the amount of the opening bid the debtor selects, in consultation with the committee, from among the qualified bids and announces at or before bidding begins.
• The auction will be held in mid-to-late October 2026 at a time and place the debtor notices. The motion states the auction will be held if the debtor receives more than one qualified bid, while the bidding procedures themselves and the proposed order state it will be held if the debtor receives one or more qualified bids; both documents provide that on a single qualified bid the debtor may cancel the auction or name that bidder the winner.
• Only qualified bidders may bid, in person and through duly authorized representatives, each with at least one representative empowered to bind it; attendance is limited to those representatives and to the debtor, the committee, and their legal and financial advisors. Bidding is open, with all material terms of each overbid disclosed to the other qualified bidders, and a certified court reporter transcribes the proceedings.
• Bidders may submit modified agreements at the auction provided the modifications, viewed in the aggregate, are not less favorable to the debtor than that bidder's prior bid; the debtor reserves the right to negotiate separately with any bidder so long as terms are fully disclosed when the bid is formally submitted.
• The debtor may adopt and announce additional procedural rules at the auction that are reasonable, consistent with the Bankruptcy Code, and disclosed to each qualified bidder.
• Each bidder must confirm it has not colluded and is not in violation of section 363(n); joint bids require the debtor's written consent after consultation with the committee. Collusion may, at the debtor's election, disqualify the bidder from further bidding or from selection as winning bidder and waive its right to a section 363(m) good-faith finding.
• Absent irregularities in the conduct of the auction, no bids will be considered after it closes.

Winning Bid and Back-Up Bid

• At the auction's conclusion the debtor, exercising its reasonable good-faith business judgment after consulting the committee, designates the highest and best qualified bid as the winning bid and the next highest and best as the back-up bid; the procedures state that bids are evaluated, in consultation with the committee, on the consideration offered and the certainty of closing.
• Both bidders must execute definitive agreements conforming to their bids as soon as practicable and no later than the start of the sale hearing; the debtor files a notice of the winning and back-up bids, redacted as necessary to protect commercially sensitive information, within two business days after the auction and in advance of the sale hearing.
• The sale order presented at the sale hearing will be the form submitted with the winning bid, except as the debtor revises it in its discretion after consulting the committee and the winning bidder.
• The back-up bid must remain open and irrevocable until the earlier of 5 p.m. ET on the date 30 days after entry of the sale order and the closing of the sale to the winning bidder. If the winning bidder fails to consummate because of its breach or failure to perform, the back-up bidder becomes the winning bidder and the debtor is authorized, though not required, to close with it without further court order, on notice from the debtor and within the closing period set in the back-up agreement.
• Acceptance of a bid as the auction winner, itself conditioned on court approval of the winning and back-up bids, occurs only once the bid is declared the winning bid, definitive documentation is executed, and any auction-driven deposit top-up is delivered.

Assumption and Assignment of Executory Contracts

• The debtor will file and serve the cure notice on each counterparty by Oct. 8, 2026, identifying the proposed cure amounts and stating the date, time, and place of the sale hearing along with the objection deadline.
• The winning bidder may add or drop contracts and leases from the assumption list, subject to notice to counterparties of any additions; a contract added under the winning bid agreement gets its own cure notice served by overnight delivery within five business days after the auction closes and the winner is announced, and the motion is deemed a separate motion to assume and assign it.
• Assumption objections must be filed and served so as to be received by 5 p.m. ET on Oct. 16, 2026, or, where the cure notice was served fewer than 20 days before that date, within 20 days after service. An objection must identify the specific default, state the monetary amount asserted, and set out any reason the contract cannot be assumed and assigned. A counterparty may separately raise an adequate-assurance objection at the sale hearing regardless of the deadline, and may request adequate assurance information from debtor's counsel by email.
• Absent a timely objection, the contract is assumed and assigned effective at closing and the counterparty receives the noticed cure amount at closing or as soon as practicable thereafter; a counterparty that fails to object timely is barred from asserting a cure amount above the noticed figure and is deemed to have consented to it. Where an objection is timely filed, the contract is not assumed or assigned until the objection is consensually resolved or overruled.
• The winning bidder bears responsibility for satisfying section 365(b) adequate assurance, and its failure to do so as to any counterparty does not excuse performance of its obligations under the winning bid agreement; the court will make adequate-assurance determinations at the sale hearing, with the debtor and the winning bidder putting on evidence of the buyer's financial credibility, willingness, and ability to perform.
• Unresolved cure disputes are resolved by the court at the sale hearing or later, and the debtor will segregate from sale proceeds a portion of any disputed cure amount in an amount the court sets or the parties agree pending resolution. Inclusion of an agreement on the cure notice is not a determination that it is executory, and nothing obligates the debtor to assume any contract or pay any cure amount.
• Upon closing, the debtor and its estate are relieved of liability accruing after assumption and assignment under section 365(k), except as the winning bid agreement provides otherwise; anti-assignment provisions are deemed unenforceable under section 365(f)(1).

Regulatory Approvals

• After entry of the sale order, the California Department of Public Health, the California State Board of Pharmacy, and the California Office of Health Care Affordability must each approve the sale to the winning bidder; the debtor and the buyer will submit the executed agreement to those authorities to commence the process, which the debtor states may take two months.
• Because the approvals follow rather than precede closing, every qualified bid must commit to closing through an interim management agreement, sale/leaseback, or other agreement under which the applicable regulatory and other approvals will be obtained after closing.

Sale Free and Clear, Successor Liability, and Good-Faith Protection

• The sale will be free and clear of all liens, claims, encumbrances, and other interests under sections 363 and 365, with liens attaching to the proceeds in the same order of priority and with the same validity, force, and effect as against the assets, subject to the debtor's claims and defenses.
• The debtor asserts satisfaction of at least one prong of section 363(f) and specifically section 363(f)(2), on the theory that lienholders will consent or, absent objection to the motion, be deemed to consent.
• The debtor asks that the sale order provide that the winning bidder is not liable as a successor under any theory for claims that encumber or relate to the purchased assets, and will seek a finding at the sale hearing that the buyer is a good-faith purchaser entitled to section 363(m) protection. The debtor also requests waiver of the 14-day stays under Bankruptcy Rules 6004(h) and 6006(d) or, if a sale objection is filed, reduction of the stay to the minimum needed for an appeal.

Reservation of Rights

• The debtor reserves the right, in consultation with the committee, to modify the procedures, impose additional terms and conditions at or before the auction, extend deadlines, adjourn the auction or the sale hearing without further notice, and reject any or all qualified bids it determines to be inadequate, non-conforming, or contrary to the estate's best interests; it may also decline to pursue the sale altogether and withdraw the sale motion, and retains the exclusive right after consulting the committee to cancel the sale at any time.
• The debtor may extend the bid deadline for one or more potential bidders until the auction commences, after consultation with the committee and without prior notice, but has no obligation to do so.
• Where the procedures and the order conflict, the order controls; where the motion's summary and the procedures conflict, the procedures control.

Key Dates

• Motion Filed: Sept. 10, 2026 [Docket No. 188]; the motion and its notice exhibits are dated Sept. 9, 2026
• Hearing on Bidding Procedures Motion: Sept. 29, 2026
• Entry of Bidding Procedures Order and Service of Procedures, Auction and Sale Notice: Sept. 30, 2026; the debtor is to file and serve the order and procedures notice within one business day after entry
• Draft APA Posted to Data Room: no later than Oct. 1, 2026
• Cure Notice Filed and Served: Oct. 8, 2026
• Assumption Objection Deadline: Oct. 16, 2026, at 5 p.m. ET (or 20 days after service where the cure notice was served fewer than 20 days before that date)
• Bid Deadline: mid-to-late October 2026, to be communicated to potential bidders
• Auction: mid-to-late October 2026, at a time and place to be noticed
• Sale Hearing: mid-to-late October 2026, at a date and time to be set by the court and noticed by the debtor
• Sale Objection Deadline: not yet set; the procedures fix the time at 5 p.m. ET but leave the date blank, with the deadline to be set by the court and noticed by the debtor
• Outside Back-Up Date: 30 days after entry of the sale order, at 5 p.m. ET, or the earlier closing with the winning bidder