GZO Spital Wetzikon enters definitive debt restructuring moratorium amid creditor tensions

GZO Spital Wetzikon has successfully transitioned from a provisional to a definitive debt-restructuring moratorium, as approved by the court. This move allows the hospital to engage in discussions with stakeholders, including bondholders, to explore viable solutions for its financial challenges.

Transition to Definitive Debt-Restructuring Moratorium

The definitive moratorium, which is set to last until June 19, 2025, can be extended for an additional 18 months, providing a maximum of two years for the hospital to stabilize its operations and restructure its debts.

The trustees overseeing the restructuring have emphasized that the hospital continues to operate effectively. They assert that all liabilities incurred during this moratorium can be managed through ongoing operations. This period is crucial for GZO as it seeks to refine its restructuring concept and prepare a debt-restructuring agreement with the definitive administrators.

Tensions with Creditors

Despite the progress in securing a definitive moratorium, significant tensions remain between GZO and its creditors, particularly the majority of bondholders holding a CHF 170 million bond that has been due since June. The GZO Creditor Group has expressed dissatisfaction with the current trustees, alleging conflicts of interest and demanding their resignation.

The proposed restructuring plan, which includes a substantial haircut of 65 to 70 percent for creditors, has not garnered the necessary approval, posing a risk of liquidation for GZO if an agreement cannot be reached.

Importance of Creditor Approval

The urgency of finding a mutually acceptable solution is underscored by the fact that creditor approval is essential for GZO to exit the debt-restructuring moratorium. The potential for liquidation looms large, threatening the future of the hospital.

The twelve shareholder communities associated with GZO are expected to play a pivotal role in the restructuring process, as their support will be crucial for any new capital injections and overall agreement on the restructuring plan.

Role of Shareholder Communities

The restructuring concept not only proposes a significant debt haircut but also calls for the shareholder communities to contribute CHF 50 million in new capital. Representatives from these communities have been actively engaged in discussions regarding the restructuring plan, with an internal information event held at the end of November to assess the situation.

Each community is now tasked with individually analyzing the initial circumstances and determining their willingness to participate in the restructuring based on their ownership stakes.

Deliberation and Decision-Making

The timeline for these decisions is expected to extend over the next two months, with clarity on potential loan applications anticipated by mid-February 2025. This careful deliberation reflects the complexities involved in aligning the interests of various stakeholders while ensuring the hospital's financial viability.

The GZO management has indicated a commitment to maintaining open lines of communication with all relevant parties, including bondholders, as they work towards a comprehensive solution.

Financial Health and Restructuring

GZO Spital Wetzikon's financial health has come under scrutiny, particularly following the announcement of a loss of approximately CHF 121 million, attributed to necessary write-downs by hospital management. This overindebtedness has raised alarms about the hospital's long-term sustainability.

However, operationally, GZO reported a profit of CHF 3.9 million in the first nine months of the year, excluding provisions for personnel costs and consulting fees.

The hospital's management has acknowledged the need for further refinement of the restructuring concept in the coming months. Despite the challenges, they have adopted a conciliatory approach, emphasizing the importance of constructive dialogue with all stakeholders.

This strategy aims to foster collaboration and develop the necessary solutions to navigate the current financial landscape effectively. As GZO continues to engage with its creditors and shareholder communities, the path forward will depend on the ability to reconcile differing interests and secure the required support for its restructuring efforts.

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