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Sustained losses could threaten Mercy Iowa City purchase

Auction-winning bondholder Preston Hollow Community Capital says Mercy Iowa City hospital is handing over obligations to fund continued operating losses in a way that has caused an impasse in any eventual sale of the facility, according to an Oct. 25 report from The Gazette.

The bankrupt hospital reported operating losses of $2.8 million in September, building on a loss of $6.4 million in August, according to the report. Such dwindling resources are at issue as Preston Hollow said it believed the hospital's foundation would be shoring up hospital finances but now suspects Mercy Iowa City wants the bondholder to offer such financial support instead.

"(Mercy's) attempt to levy a significant additional funding burden on the bondholder representative retroactively has created an impasse, and (Mercy) has refused to move forward with the transaction," Preston Hollow said during the bankruptcy auction earlier this month. Transcripts from the auction were recently made public due to court filings and were obtained by the Gazette.

Preston Hollow won with a bid of $29 million for the 234-bed facility, outfunding a rival bid from University of Iowa Health Care, also based in Iowa City. A hearing on how to navigate the hospital's operating losses is scheduled for Oct. 30, according to the report.

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