OB-GYN Associates of Iowa hearing on DIP facility, dismissal motion set

By Sarah Lizee

Olympia, Wash., Jan. 24 – Obstetric and Gynecologic Associates of Iowa City had a hearing on final approval of a $1.1 million debtor-in-possession facility and consideration of a motion to dismiss the debtor’s case scheduled for Feb. 28, according to a minute entry filed Monday with the U.S. Bankruptcy Court for the Southern District of Iowa.

A judgment creditor, through a conservator, has filed a motion to dismiss the case, alleging that it wasn’t filed in good faith.

The judgement creditor called the filing a litigation tactic and an attempt to circumvent the Iowa Supreme Court requiring the debtor to post a full statutory required bond in excess of $100 million.

The debtor is seeking to gain the advantage of a stay of execution, despite refusing to meet the Iowa code and the Supreme Court imposed burden of providing a bond, the dismissal motion said.

The court said in the minute entry that in light of the motion to dismiss and due to scheduling constraints, it would allow the company to access $75,000 of the proposed post-petition facility to continue its operations until the hearing.

As previously reported, the company has been seeking approval of DIP financing since the early stages of the case.

Following objections to the initial DIP motion, including from the U.S. trustee overseeing the case, the company recently negotiated different terms of the financing with the DIP lender, MMIC Insurance, Inc.

The amended facility contains some concessions made by the DIP lender.

All case milestones were removed except for one – filing a bid procedures motion within 14 days from entry of a final DIP order.

The DIP lender agreed that its professional fees and costs won’t be paid for by the debtor’s estate.

And, the DIP lender has agreed not to seek a security interest in avoidance actions held by the debtor’s estate.

As before, the DIP term loan would allow for up to two $250,000 incremental increases.

Interest will be 4.5%, subject to a 2% increase as a default rate.

The term of the DIP loan will be the earliest of one year after the petition date, the closing of the sale of assets, the effective date of any Chapter 11 plan, the appointment of a Chapter 11 trustee or examiner, conversion of the case to a Chapter 7 case or dismissal of the case.

Proceeds are earmarked for cash to finance operations and avoid any disruptions in patient care with support for the administrative expenses associated with the bankruptcy case.

The obstetric and gynecologic clinic is based in Coralville, Iowa. The company filed bankruptcy on Oct. 31 under Chapter 11 case number 22-01174.

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