FORUM HEALTH: Debtor & Committee Have Competing Ch. 11 Plans

(Troubled Company Reporter - Feb. 15, 2011)

The TCR reports that Forum Health and its affiliated debtors filed on Friday a proposed Chapter 11 plan of liquidation and an explanatory disclosure statement. The Debtors are facing a competing Chapter 11 plan from the unsecured creditors committee, which filed a its own plan early this month.

In August 2010, following a bankruptcy auction, a substantial portion of Debtors' assets -- Forum's healthcare services network consisting of three hospital campuses -- were sold to Youngstown Ohio Hospital Company, LLC, an affiliate of CHS Community Health Systems, Inc., for of $69,800,000. The sale closed on October 1, 2010. The proceeds of the sale of the Debtors' key assets were paid to holders of prepetition secured bonds owed a total $194 million.

Certain assets were excluded from the sale, including but not limited to cash, insurance proceeds, causes of action and amounts due to a debtor from intercompany transactions. The Debtors' Plan generally provides for the liquidation of the Debtors' remaining assets and distribution of proceeds to creditors in accordance with the Bankruptcy Code.

Any remaining unpaid secured claims will be paid in full under the Debtors' Plan.

According to the Disclosure Statement, the allowed claims of general unsecured creditors will not be paid in full under the Plan due to insufficient funds from liquidation of the Debtors' assets. Holders of unsecured creditors claims aggregating $152,000,000 to $167,000,000 are expected to recover 4.88% to 5.36%. Most of the Pension Benefit Guaranty Corp.'s $140,000,000 claim -- for unfunded contributions for a pension plan for 7,132 former employees of Forum Health -- is treated as an unsecured claim.

Holders of equity interests won't receive any distributions.

The Debtors have ceased operations as a healthcare provider and the Debtors continue to wind down their affairs.

A copy of the disclosure statement explaining the Debtors Plan is available for free at:

http://bankrupt.com/misc/ForumHealth_PlanOutline.pdf

Committee Plan

Since November 2010, the Debtors engaged in negotiations with the Official Committee of Unsecured Creditors regarding a joint Chapter 11 plan. During the course of those discussions, however, the Committee raised an objection to the Debtors' proposal to (i) exclude two affiliates -- Western Reserve Health Foundation and Trumbull Memorial Hospital Foundation -- Foundations from a joint plan and (ii) seek dismissal of the Foundations' cases.

The Committee rejected the Debtors' suggestion and, instead, filed its own plan and disclosure statement. The Committee Plan estimates that unsecured creditors will recover 15% to 17% of their claims. A copy of the disclosure statement explaining the Committee Plan is available for free at:

http://bankrupt.com/misc/ForumHealth_Committee_DS.pdf

The objection deadline for the Creditors' Committee disclosure statement is March 8, 2011, and the hearing is March 15,
2011.

As a result of the Committee's plan filing, the Debtors completed its own Chapter 11 plan and filed it in time so that the Court can address the two plans and the motions to dismiss together at the hearing on March 15, 2011 or such other time as the Court deems appropriate.

The Committee Plan contemplates substantive consolidation of the all the Debtor entities. The Debtors do not believe that substantive consolidation as proposed in the Committee Plan is appropriate.

The attorneys of the Debtors may be contacted at:

Shawn M. Riley, Esq.
Sean D. Malloy, Esq.
Matthew A. Salerno, Esq.
Melissa S. Giberson, Esq.
McDONALD HOPKINS LLC
600 Superior Avenue, East, Suite 2100
Cleveland, OH 44114-2653
Telephone: (216) 348-5400
Facsimile: (216) 348-5474
E-mail: sriley@mcdonaldhopkins.com
smalloy@mcdonaldhopkins.com
msalerno@mcdonaldhopkins.com
mgiberson@mcdonaldhopkins.com

- and -

Michael A. Gallo, Esq.
NADLER NADLER & BURDMAN CO., L.P.A.
20 West Federal Street, Suite 60
Youngstown, OH 44503-1423
Telephone: (330) 744-0247
Facsimile: (330) 744-8690
E-mail: gallo@nnblaw.com

About Forum Health

Forum Health and its affiliates filed for Chapter 11 protection on
March 16, 2009 (Bankr. N.D. Ohio Lead Case No. 09-40795). In its petition, Forum Health estimated $100 million to $500 million in assets and debts.

McDonald Hopkins LLC and Nadler, Nadler and Burdman Co., L.P.A., serve as the Debtors' chapter 11 co-counsel. Huron Consulting Services LLC is the Debtors' Chief Restructuring Officer and Financial Support Personnel. Houlihan Lokey Howard and Zukin Capital, Inc. are the Debtors' investment bankers. Ernst & Young LLP is the Debtors' independent auditor. Baker and Hostetler and Thompson Hine LLP serve as special counsel. Squire, Sanders & Dempsey LLP serve as the bond counsel. Kurtzman Carson Consultants LLC is the claims and notice agent.

Alston & Bird LLP serves as counsel to the Official Committee of Unsecured Creditors. Grant Thornton LLP is the financial advisor to the Creditors Committee.