Judge moves Mercy Iowa City sale hearing after auction delays

IOWA CITY — Without disclosing details about ongoing backroom auction deliberations, a U.S. bankruptcy judge has agreed to postpone “to a later date” a sale hearing for Mercy Iowa City’s assets that was scheduled for Tuesday.

Although the hospital early in its Chapter 11 bankruptcy proceedings stressed the need for urgency — given ongoing operating losses depleting resources available to pay back creditors — the order bumping the sale hearing suggested a delay appears “in the best interests of (Mercy), their estates, their creditors, and other parties-in-interest.”

An auction for Mercy’s assets between the University of Iowa and at least one other bidder kicked off Wednesday. After days of secret negotiations, Mercy asked to reset the sale hearing and continue the auction into this week — noting, however, that it had not connected with UI attorneys about the continuance.

“Counsel for the (unsecured creditors committee) and bondholders have notified (Mercy) that they do not object to this motion,” according to the Friday request to move the hearing. “While (Mercy) has reached out to counsel for the (UI) about whether the (UI) consents to the motion, (Mercy) has not received a response as of the time of filing this motion.”

In Mercy’s request, attorneys noted the presale auction would continue this week — although they didn’t give a specific day or suggest a specific time for the reset hearing, only identifying the week of Oct. 16 as an option.

The Tuesday hearing was supposed to cover more than just the sale — although that piece makes it a “core proceeding.” It also was to deliberate Mercy’s continued use for daily operations of cash that could eventually be used to pay back creditors and a bondholder request for an examiner to investigate certain aspects of the bankruptcy.

“A hearing date on the motions shall be set by the court upon subsequent motion of (Mercy),” according to the court order. "This order is without prejudice to any parties’ rights to seek further continuances.“

Comments: (319) 339-3158; vanessa.miller@thegazette.com