Hahnemann bankruptcy lawyers try to stop Joel Freedman from increasing Hahnemann building debt

Joel Freedman, the Californian businessman who went bankrupt and closed Hahnemann University Hospital in 2019, has sparked more unrest in the bankruptcy case unfolding in Wilmington.

Freedman says he’s strapped for cash to keep the heat, pay for security, if not maintain the old Hahnemann buildings on Broad & Vine Streets in Philadelphia and wants to borrow $ 17.5 million – using the buildings as collateral – to cover costs while trying to find a buyer.

Lawyers for bankrupt Hahnemann entities and unsecured creditors are crying scandal.

When Freedman bought Hahnemann and St. Christopher’s Children’s Hospital in 2018, he separated real estate from hospital operations. This means that the building is not bankrupt and that the proceeds from its sale cannot be used to pay Hahnemann’s debts.

Despite this, potential lenders asked Friedman to get a blessing for the 15-month loan in bankruptcy court.

This is because the bankrupt shells he left behind – still millions in debt to sellers and other creditors – make a long-drawn-out effort to force Freedman’s Hahnemann real estate into bankruptcy so that the proceeds of a possible sale could be used to pay off claims that could reach $ 300 million, according to one estimate.

READ MORE: Hahnemann turns out to be a tough real estate game.

The Hahnemann shell lawyers and the creditors want to block the loan, or at least make sure that the money doesn’t go into the pockets of Freedman or his advisers and instead is used only to take care of the buildings.

A sign of just how controversial Hahnemann’s bankruptcy has become, an online hearing Friday before U.S. bankruptcy judge Mary F. Walrath didn’t even address whether the loan should be authorized, but rather how much information lawyers trying to block should get. how the money will be used.

Lawyers for the bankrupt Hahnemann entities said at the hearing that $ 6.5 million of the $ 17.5 million was the cost of the loan itself. Other pieces are planned for unspecified expenses and for payments to a pension fund for members of District 1199C, which represented nurse aides, housekeepers and other Hahnemann staff. They want more information.

Minuti said the aim is to block liens on real estate that would lead to the use of the money for “illegitimate purposes”, namely for something other than upkeep of the property. “They should be able to show what they are using the money for,” Minuti told the judge.

Robert J. Malionek, a Latham & Watkins LLP attorney representing Freedman, told Walrath that the lawyers for the bankrupt shells are making excessive demands for documents because they want to “look for evidence” to support claims in a sealed trial alleging that Freedman’s real estate should be part of the bankruptcy.

In a filing on Thursday, Malionek and other attorneys for Latham & Watkins said lawyers for the Hahnemann shells opposed the loan because they wanted Freedman to run out of cash and be forced “into a settlement. unreasonable conditions “.

READ MORE: It would have taken a miracle to save Hahnemann.

Freedman sparked an uproar over Hahnemann’s bankruptcy over the summer when he said he wanted to fire Hahnemann’s restructuring director and two outside directors who had overseen a company’s structure for two years. He also said he wanted to replace Saul Ewing with a bankruptcy trustee who closed the case. None of these things happened.

Walrath on Friday granted Minuti’s request for details of how the $ 17.5 million loan money would be spent, including documenting pension payments, but rejected several other requests for information like irrelevant or out of bounds.

A hearing on the loan itself is scheduled for December 1.

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