ST. LOUIS — St. Alexius Hospital received a federal Paycheck Protection Program loan after challenging a Small Business Administration rule forbidding the relief for firms facing bankruptcy.
According to court documents, the south St. Louis facility, which filed for Chapter 11 bankruptcy protection in December, initially applied for a $5.1 million forgivable PPP loan through U.S. Bank on April 9 but missed out when the program ran out of money. Once Congress approved a second round of funds, the hospital's bankruptcy trustee said it was told by the bank that it no longer a qualified for the program.
That's because on April 28, just days after Congress approved the second round of PPP funding, the SBA issued guidance declaring Chapter 11 debtors ineligible for PPP funds. Last month the hospital sued the SBA's administrator, Jovita Carranza, in bankruptcy court in London, Kentucky, where its Chapter 11 case is proceeding.
St. Alexius claimed it should be eligible, and that without PPP money or other new funding it could be forced to close by mid-July. Sixty percent of a PPP loan must be spent on payroll to qualify for forgiveness; the hospital has more than 300 employees.
It said in court papers that a "significant portion" of its revenue comes from outpatient procedures and "non-essential office visits or procedures." St. Alexius added that Missouri's stay-at-home order, in place April 3 to May 3, led to the cancellation of that non-emergency health care. A city of St. Louis shelter-in-place order was eased later, on May 18.
"These cancellations and deferrals have had — and are expected to continue to have — at least a 25% reduction in (St. Alexius') cash receipts alone, a substantial blow to a hospital that is still suffering the ill effects of prior management, it said in court documents.
A bankruptcy judge, Gregory Schaaf, agreed, and issued a temporary restraining order against the SBA May 8. St. Alexius indicated it received PPP funding May 19, though it did not disclose the amount.
Schaaf wrote in his order that Carranza's claim "seems to lack a foundation."
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