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Troubled Mercy Iowa City facility may not remain a hospital

Mercy Iowa City hospital, which is the subject of a takeover by the University of Iowa health system, may not remain as a hospital as bondholders seek to solicit other competitive bids from the likes of developers, according to a Sept. 12 The Gazette report.

Mercy has agreed to a change in the original terms of the bankruptcy ruling, which stated that any bidders would be required to maintain the facility as a hospital. 

Mercy is under pressure from key bondholders such as Preston Hollow Community Capital, which has previously argued Mercy "threw in the towel" when it agreed to bankruptcy proceedings. They view the $20 million bid from the University of Iowa as highly undervaluing the facility, which has also been estimated at closer to a $137 million value.

"The fundamental purpose of bidding procedures in the bankruptcy context is to maximize the proceeds received by the estate for the benefit of creditors," according to the bondholders' objection. "The assets should be broadly marketed for a variety of potential uses, not just as a continuation of [Mercy's] existing health care facilities."

The potential sale of the hospital is also likely to be delayed, according to the report. Mercy has agreed to an Oct. 2 deadline extension for competing bids rather than the original Sept. 19 date.

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