Lang/Hunter
10/10/23
Mercy Iowa City finally has a new owner.
Preston Hollow Community Capitol won a two-entity bidding war against the University of Iowa Hospitals and Clinics that began almost a week ago in Chicago. Preston Hollow was a major bondholder for Mercy. In July, the group asked that the hospital facility be put on a court-appointed receivership after Mercy defaulted on its bond agreement.
Mercy filed for Chapter 11 bankruptcy on August 7th, and the UI submitted a stalking horse bid of $20 million earlier this year. Preston Capitol placed a competing bid on October 2nd, leading to the auction.
Under Preston Hollow, the day-to-day operations of Mercy will be handled by American Healthcare Systems. Ownership will be organized as an Iowa not-for-profit. Its board of directors will be made up of community members from Iowa City and Johnson County.
In a release from Mercy Iowa City Wednesday morning, the teams at Preston Hollow Community Capital and American Healthcare Systems will conduct several all-team meetings with the doctors, nurses, and other employees at Mercy Iowa City to hear their feedback and recommendations, and answer questions while the transfer is taking place.
Additionally, Preston Hollow Community Capital and the other bond investors will make significant capital investments in order to stabilize the hospital’s operations, restore community-care service lines, and bring the facility back to profitability.
Patrick Magallanes is the President and CEO of Steindler Orthopedic, who have been providing orthopedic care at Mercy for nearly 75 years. In Mercy’s release, he said, “The Steindler team looks forward to working closely with Preston Hollow and American Healthcare Systems during the transition and the ongoing management of the new hospital.”
The amount of the winning bid has not been released. Previously, Preston Hollow and master trustee Computershare did indicate in court filings that they planned to utilize some or all of the $63 million the hospital owes them and convert that into a bid for the assets.