Judge Elizabeth S. Stong of the U.S. Bankruptcy Court for the Eastern District of New York in Brooklyn extended the hospital operator's exclusive right to file and solicit a Chapter 11 plan on Tuesday, Feb. 14. Robert M. Hirsh of Arent Fox LLP, counsel to the official committee of unsecured creditors, said, however, that Stong also granted the committee's request for co-exclusivity after the debtor raised no objections to the motion.

Hirsh said the hospital and committee plan to file a joint reorganization plan by the end of next week. If that plan does not work out, though, the committee anticipates filing a competing plan, Hirsh said.

Peninsula on Jan. 13 had requested a 30-day extension of its exclusive right to file a plan, which had been set to expire Jan. 19, and its sole right to solicit plan acceptances, which was set to end March 19.

Peninsula said it has been diligently working with the creditors' committee to formulate a consensual reorganization plan.

The committee filed a limited objection to the exclusivity motion because it wanted co-exclusivity with the debtor. The committee said despite the group's urging, Peninsula did not appear to have pursued any possible reorganization alternatives other than a deal with debtor-in-possession lender Revival Funding Co. LLC, an affiliate of Revival Home Health Care LLC. Therefore, the committee requested co-exclusivity with the Far Rockaway, N.Y., debtor so the committee could explore other restructuring alternatives transparently.

The committee is not the only one to cast a skeptical glance at Peninsula's restructuring work.

U.S. Trustee Tracy Hope Davis sought an examiner or Chapter 11 trustee for the debtor, asserting that "from the inception of these cases, the U.S. Trustee repeatedly has questioned the possible conflicts of the debtors' management and the lack of a viable reorganization strategy."

Stong approved the motion on Dec. 9.

The examiner subsequently appointed, Richard J. McCord of Certilman Balin Adler & Hyman LLP, investigated the debtor's prepetition relationship with Revival, current transactions between the debtor and Revival, and relationships between the debtor's management and board of directors and Revival Funding, court papers said.

McCord's report, filed Jan. 31, said, "There is at a minimum the appearance of conflicts of interest between current management and the debtors." The examiner, however, found no evidence of fraud in Revival's exchanges with the debtor. He concluded the relationship between the parties should continue to be monitored by a third party unrelated to the case.

A final hearing on Revival's $3 million DIP, meanwhile, was scheduled for Tuesday, but the hearing was continued until Friday. Stong on Dec. 22 approved interim use of the DIP.

The postpetition is priced at 9% per annum. If the company defaulted on the loan, the interest rate would increase to 14% per annum.

Under terms of the DIP, filed Dec. 9, there is a $215,000 carve-out for professional fees.

The financing carries a $75,000 origination fee and a $20,000 per month collateral management fee.

Without access to the new DIP loan, the hospital operator said it wouldn't be able to operate after Dec. 26.

The new DIP primes a $6.35 million secured claim held by lender 1199 SEIU National Benefit Fund.

Peninsula originally secured an $8 million DIP from Revival, but the debtor on Dec. 7 withdrew the motion for the financing before a hearing was held.

Revival had formally agreed to maintain the hospital and nursing home for a minimum of three years and provide up to $27 million in cash, minus what is used on the DIP, to fund the debtor's reorganization plan, which was never filed with the court.

Creditors Total MedBiz.com Inc. of New York ($78,709), Advanced Seamless Gutters & Leaders Inc. of New York ($48,000) and Wayne S. Dodakian of New Britain, Conn. ($495) forced Peninsula into Chapter 11 on Aug. 16.

The debtor consented to the case on Sept. 19 and put affiliate Peninsula General Nursing Home Corp. in Chapter 11 protection as well. The cases have been jointly administered.

The debtors blamed their bankruptcy filing on rising operating costs with which reimbursement for its services has failed to keep pace.

The hospital operator's parent, not-for-profit Medisys Health Network Inc., cut off support as of Aug. 22 and demanded payment of $6 million in past-due amounts.

Peninsula Hospital Center operates a 173-bed acute-care community teaching hospital campus, while Peninsula General Nursing operates a 200-bed long-term-care and rehabilitation skilled nursing center. Peninsula Hospital Center also has a 14-bed private room inpatient hospice care center.

The nursing facility specializes in short-term rehabilitation respiratory care, court documents said.

Peninsula Hospital Center provides acute, rehabilitative, outpatient, diagnostic, primary care and wellness to the communities of the Rockaways, the Five Towns of Nassau County (Woodmere, Cedarhurst, Inwood, Hewlett and Lawrence) and parts of Queens and Brooklyn, its website said.

According to court papers, it is one of two hospitals on the Rockaways Peninsula.

The debtor, which was founded in 1908, has 1,000 employees.

Debtor counsel Deborah J. Piazza of Abrams, Fensterman, Fensterman, Eisman, Greenberg, Formato & Einiger LLP didn't respond to requests for comment.

Isaac Nutovic of Nutovic & Associates and Menachem Bensinger of McGrail & Bensinger LLP represent the DIP lender.