A federal bankruptcy judge may start the process of shutting down Hidalgo County EMS if the company can’t find a buyer “in the very near future.”
During a hearing on Friday, attorney Nathaniel Peter Holzer of Corpus Christi, who represents Hidalgo County EMS, told U.S. Bankruptcy Judge David R. Jones the company had shared financial data with several potential buyers.
Jones encouraged Hidalgo County EMS to find a buyer quickly, but he said the bankruptcy court would prioritize ambulance service over financial considerations.
“I’m going to assume that you’re turning over every rock and contacting every competitor,” Jones said. “And whether it’s one piece, multiple pieces, a partial piece, sometimes we can’t save everything. And sometimes we can cover this county and this city but not that one.”
Hidalgo County EMS is trying to find a buyer before March 26, when the judge will consider a motion to convert the bankruptcy case from Chapter 11 to Chapter 7.
Chapter 11 protects a business from creditors while it attempts to restructure. Chapter 7 creates an orderly process for business liquidation.
“Let’s keep the focus on the citizens who benefit or who need the service,” Jones said. “And we’ll deal with the economic issues once we see how this is all going to sort out.”
Meanwhile, the company remains in the midst of a major cash crunch.
Hidalgo County EMS isn’t paying attorneys and consultants hired to steer the company through bankruptcy. Hidalgo County EMS failed to pay more than $100,000 to the Office of the United State Trustee, which monitors bankruptcy cases. And the company allowed insurance coverage to lapse on five Ford trucks.
“Now, the headline is: ‘There’s no current risk of a precipitous shutdown,’” Holzer said. “We have enough cash to operate. We have enough cash for payroll. If we’re not paying the U.S. Trustee fees or the professionals, then we can maintain operations.”
Hidalgo County EMS — a privately owned ambulance company that responds to emergency calls in Pharr, Edinburg, the majority of western Hidalgo County and other parts of rural South Texas — filed for bankruptcy in October 2019.
The company, though, never filed a reorganization plan. It struggled financially and lost nearly $930,000 from October 2019 to January 2021, according to a report filed with the bankruptcy court on Friday.
Holzer said he and Chief Restructuring Officer Richard S. Schmidt, who took the job in September, agreed that Hidalgo County EMS can’t be reorganized.
“We agree that if there’s not progress on the sale front in the very near future that the business has to be closed down,” Holzer said. “So I think we’re in agreement with the government on that front and I think we can work cooperatively in that regard.”
Hidalgo County EMS had financial and management problems for years before it filed for bankruptcy.
The company didn’t file tax returns in 2017, 2018 or 2019, Holzer said.
Problems with cash flow occasionally forced employees to delay depositing their payroll checks. Hidalgo County EMS also had accounting issues and inadequate financial controls.
After the company filed for bankruptcy, the coronavirus pandemic and a dispute with the U.S. Small Business Administration over a Paycheck Protection Program loan created new problems.
November and December were difficult months for Hidalgo County EMS, Holzer said. Revenue dropped and the company struggled to make payroll.
“The goal, of course, is to save the jobs and keep the ambulances running. I think we’ve done a very good job of that. I’m proud of what we’ve done,” Holzer said. “This company is still standing. It never did shut down. And it came very close on some occasions.”
Other problems, which Holzer didn’t want to discuss in public, also surfaced during the bankruptcy.
“And we’ve got subpoenas flying now from every direction,” Holzer said. “And then another matter that I do want to discuss with the court in a sealed session.”
Jones, the bankruptcy judge, said he couldn’t guarantee the confidentiality of proceedings held by teleconference. Holzer dropped the request.
The U.S. Attorney’s Office for the Southern District of Texas, which represents the IRS in the bankruptcy case, and the Office of the United States Trustee appeared willing to cooperate with Hidalgo County EMS to avoid an abrupt shutdown.
“My clients — and I think all of us, all the professionals on the line today — are worried that this company is going to shut down suddenly,” said Assistant U.S. Attorney Richard Kincheloe. “And if it does, we’re going to be in a place where we’re not talking about credit recovery. We’re talking about people without ambulance service.”