SHERMAN OAKS : State to Benefit From Hospital Debt Plan

Triad Healthcare Inc., which operates Sherman Oaks Hospital and Health Center, said it has emerged from bankruptcy with a reorganization plan that will give state government an opportunity to recover at least $36 million of nearly $167 million in state-insured debt.

Triad entered federal bankruptcy protection in February, 1994, after the Sherman Oaks-based company defaulted on $167 million in bond debt guaranteed by Cal-Mortgage, a state program that has helped many health-care companies qualify for low interest loans. Triad’s default raised concerns that state taxpayers might be left to pay for the loan.

As a result of the bankruptcy reorganization, Triad is obligated to repay $36 million of the debt through a 25-year note. But the state will also have claims on Triad’s future cash flow--if the company can make its way back to financial health--for the balance of the debt.

“Triad has the resources to compete successfully for many years to come, and should be able to generate some money for the state on that cash-flow note,” said Dennis I. Simon, the bankruptcy trustee of Triad, and a director in the corporate recovery group of Price Waterhouse in Los Angeles.

Triad’s first payment to the state is due in two years, according to a statement released by the company Monday. The company had used the state-backed debt in 1991 to acquire the 159-bed Sherman Oaks Hospital, which houses the Burn Center, as well as West Valley Hospital and Health Center, a 139-bed facility in Canoga Park that closed in January.

Triad’s reorganization plan was approved by company creditors in voting that began in December, and by the U.S. Bankruptcy Court in an order that was entered March 23. The nonprofit company has appointed a new board of directors, and David Levinsohn, formerly chief operating officer, has been named chief executive officer.