Rock Regional Hospital - DIP Terms

DIP Terms

Borrower(s) / Guarantor(s)

• Rock Regional Hospital, LLC, as Debtor and Borrower
  • The Debtor owns and operates a hospital in Derby, Kansas, employing approximately 200 workers.

Agent / Lender(s)

• A group of investors holding ownership interests in the Debtor, as Interim DIP Lender
  • The Interim DIP Lender is an insider or related to an insider.
  • The precise structure and identity of the lender has not yet been determined.

DIP Commitments

• $2.5 million new money senior secured term loan facility available on an interim basis
  • The facility is available to fund deficiencies in the operating budget if the usage of cash collateral is insufficient.
  • The Debtor acknowledges that no alternative financing was available on equal or more favorable terms.

Cash Collateral

• The Debtor is authorized to use cash collateral, including cash, negotiable instruments, receivables, Medicare proceeds, and inventory, to fund ordinary operating expenses and liquidation costs.
• Specified Period: Through March 31, 2026 (or plan confirmation, whichever occurs first).
• Lienholders: Parties asserting liens on cash collateral include:
  • Equity Bank ($4.8 million)
  • McKesson Corporation ($2,254)
  • Anatomy IT, LLC ($466,900)
  • Internal Revenue Service ($2.09 million regarding ERC credits)
  • Various other vendors and secured parties including Sysco Kansas City, Inc., Instafunders, and Cedar Advance, LLC.

Interest Rate

• 12.0% per annum

Fees

• None

Maturity

• The earliest to occur of:
  • June 1, 2026
  • The effective date of a Chapter 11 plan
  • The closing of a sale of substantially all of the Debtor’s assets
  • Dismissal of the Chapter 11 case
  • Conversion of the case to another chapter
  • Such other date as agreed to by the parties

Carve Out

• Debtor’s Counsel: $100,000
• Official Committee of Unsecured Creditors’ Counsel: $50,000
• Debtor’s Accountant: $30,000
• Healthcare Ombudsman: $20,000
• Sale Costs: Broker commissions, marketing fees, and similar expenses authorized by a §363 order.

Use of Proceeds

• Payment of operating expenses in accordance with the budget where cash collateral is inadequate
• Payment of costs and expenses of administering the Chapter 11 case

Securities and Priorities

• The DIP obligations constitute superpriority administrative expense claims pursuant to Section 364(c)(1).
• The DIP superpriority claim is junior to the Senior Adequate Protection Superpriority Claim granted to Equity Bank.
• Repayment of the DIP financing is subordinate to the repayment of creditors holding valid liens on the Cash Collateral as of the Petition Date.

Adequate Protection

Equity Bank ("Equity")

• Replacement Liens: Valid, automatically perfected post-petition replacement liens on all pre- and post-petition assets (including proceeds) to the extent of the Debtor's use of Cash Collateral.
  • These liens maintain the same priority as Equity’s prepetition liens.
• Superpriority Claim: An allowed "Senior Adequate Protection Superpriority Claim" under Sections 503(b) and 507(b), payable from the proceeds of any sale of collateral (other than Cash Collateral).
  • This claim has priority over all administrative expenses and unsecured claims, subject only to the Carve Out.

McKesson Corporation

• To the extent the McKesson claim is less than $5,000, the Debtor is authorized to pay the claim in full to eliminate McKesson's lien on the Cash Collateral.

Waivers

• The Interim Order explicitly states that it does not constitute a waiver or modification of:
  • Any rights regarding the allowance, treatment, or amount of claims and interests in the bankruptcy case.
  • Any rights that Equity Bank or other creditors may assert against non-debtor co-borrowers or guarantors.

Permitted Variance

• Line-Item Variance: Actual disbursements may not exceed 125% of each line-item amount set forth in the budget, measured monthly.
  • A timing variance of up to two months is permitted for monthly expenses.
• Cumulative Variance: The cumulative total amount in the budget is not subject to variance, except by agreement or court order.