A bankruptcy judge on Monday approved a plan for the city of Pharr to buy the assets of Hidalgo County EMS for $1 million.
The city agreed to pay $1 million for Hidalgo County EMS assets, including ambulances and equipment. Pharr will not acquire the company’s debt, liabilities or accounts receivable.
U.S. Bankruptcy Judge David R. Jones approved the sale Monday afternoon, contingent upon Hidalgo County EMS coming up with enough cash to close the transaction. Hidalgo County EMS is about $153,000 short.
“In the scheme of things, that’s not going to mess this deal up,” said Chief Restructuring Officer Richard S. Schmidt. “It’s going to be solved. This sale is going to go forward.”
The deal is expected to close within 30 days.
Hidalgo County EMS and Pharr will work together to avoid any disruption in ambulance service during the transition, Schmidt said. The city is already hiring paramedics, supervisors and other personnel.
“We’re maintaining good response times at the present time,” Schmidt said.
Reached for comment, City Manager Edward M. Wylie said Pharr would release a statement.
Hidalgo County EMS — a privately owned ambulance company that responds to emergency calls in Pharr, Edinburg and rural parts of Hidalgo County — filed for bankruptcy in October 2019.
The company owed $2.6 million to the IRS, according to court records, and hadn’t filed tax returns for 2017, 2018 or 2019.
Hidalgo County EMS filed for Chapter 11 bankruptcy, which protects a company from creditors during the reorganization process. The company, though, never submitted a reorganization plan.
Amid the coronavirus pandemic, Hidalgo County EMS became embroiled in a dispute with the U.S. Small Business Administration over whether or not the company qualified for a Paycheck Protection Program loan.
Hidalgo County EMS applied for the loan in the midst of the litigation, which prompted the U.S. Attorney’s Office for the Southern District of Texas to accuse the company of fraud.
Schmidt, a retired bankruptcy judge, became chief restructuring officer in the middle of the controversy.
He concluded that reorganization wasn’t realistic. Hidalgo County EMS needed to find a buyer.
Pharr submitted the only bid for “substantially all” Hidalgo County EMS assets, according to documents filed with the bankruptcy court. After reviewing the bid, Hidalgo County EMS negotiated a proposed agreement with the city.
Schmit and Nathaniel Peter Holzer, an attorney for Hidalgo County EMS, presented the agreement for approval on Monday.
The $1 million paid by the city will allow Hidalgo County EMS to pay creditors. A breakdown filed with the court showed the bankruptcy estate had a $153,000 cash shortfall.
“This is a situation — it’s a zero-sum game, right? There’s no one making money out of this. I haven’t yet figured out how the professionals are all going to get paid. This is a problem all the way around,” said Jones, the bankruptcy judge. “And we have been focused on what this company did. And that is to provide a very valuable service to folks who don’t have alternatives.”
Schmidt and Assistant U.S. Attorney Richard A. Kincheloe, who represents the federal government in the bankruptcy case, said they had discussed a potential solution to address the shortfall.
The court scheduled a follow-up hearing for Wednesday.