Interfaith Medical Center disputes Dasny DIP loan default allegations

By Caroline Salls

Pittsburgh, Jan. 17 - Interfaith Medical Center, Inc. counsel Alan J. Lipkin disputed the Dormitory Authority of the State of New York's (Dasny) claims that the company is in default on its debtor-in-possession credit agreement, according to a letter filed Thursday with the U.S. Bankruptcy Court for the Eastern District of New York.

"Dasny's default allegations are either incorrect or based on alleged technical defaults that could only exist because Dasny repeatedly has refused to amend the DIP credit agreement and DIP order to reflect developments, such as the passage of time and increased funding for [Interfaith], that occurred entirely as a result of demands and instructions of the New York State Department of Health and/or Dasny," the filing said.

Interfaith said New York's "dysfunctional dealings" with the company are demonstrated by the health department's directions to keep the medical center operating into March, while Dasny seeks to cut off the funding for those operations.

As previously reported, Dasny requested a conference with Judge Carla E. Craig to discuss a notice of default sent to Interfaith Medical Center.

According to Dasny, it has provided Interfaith with the use of more than $180 million of Dasny's cash collateral and $9.85 million of post-bankruptcy financing. Dasny has also committed to provide an additional $11.25 million as part of the debtor-in-possession transaction.

Dasny claims Interfaith is in default of the final DIP order and DIP loan documents and, in particular, has refused to transition its clinics to Kingsbrook.

A status conference is scheduled for Jan. 21.

Interfaith, a Brooklyn, N.Y., multi-site health-care system operator, filed for bankruptcy on Dec. 2, 2012. Its Chapter 11 case number is 12-48226.

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