That lender was Spring Valley City Bank, according to Sept. 5 federal court filings. In a recent pleading filed in U.S. Bankruptcy Court for the Northern District of Illinois, St. Margaret’s President and CEO Tim Muntz said on June 5 the bank “swept nearly $7.3 million” in funds despite a “forbearance agreement” entered about six weeks earlier.
That decision, Muntz told the court, left St. Margaret’s with “no choice” but to announce “the need to cease operations.”
An email requesting comment sent to Matthew E. Merboth, president and CEO of Spring Valley City Bank, and to two junior officers was not immediately returned. Calls to Merboth’s office and to attorneys representing the bank in St. Margaret’s Chapter 11 proceedings also went unanswered.
As previously reported, St. Margaret’s had warned earlier this year that the Spring Valley hospital was under financial strain and was in danger of being shuttered. However, St. Margaret’s never publicly disclosed any party to its 11th hour financial discussions, according to the court filing.
Between June 1 and 2, St. Margaret’s Health-Spring Valley deposited net sale proceeds from the closing of the “Stage One Sale,” totaling more than $2.9 million, into an account at Spring Valley City Bank, according to the filing signed by Muntz. Earlier in the pleading, Muntz identified the bank as the “primary secured lender” for St. Margaret’s.
“This deposit of funds was specifically contemplated and required by that certain forbearance agreement dated as of April 20, 2023, among SVCB, SMH-SV and SMH-Peru,” according to the filing. “The debtors (St. Margaret’s) had achieved the additional liquidity requirement of an amount not less than $2 million thereunder as a result of closing the Stage One Sale.”
But on June 5, Spring Valley City Bank “swept nearly $7.3 million” from St. Margaret’s Health-Spring Valley, according to the filing.
“The SVCB Setoff came without warning,” Muntz told the court. “SVCB pulled the funds despite being fully aware of the liquidity needs of the debtors.”
Spring Valley City Bank “had no claim to the monies, as the funds in question were not derived from the SVCB collateral.”
“Moreover, at the time of the SVCB Setoff, the debtors were fully compliant with the terms of the forbearance agreement,” Muntz told the court. “Without access to the swept funds, the debtors had no choice but to abruptly notify employees, inpatients then receiving medical care, and thousands of other patients receiving care at many of the debtors’ clinics of the need to cease operations.”