As its bankruptcy process rolls on, Health Diagnostic Laboratory is ridding itself of excess equipment and making room to potentially lease out extra space in its massive downtown headquarters.
HDL is seeking approval from a federal bankruptcy judge to continue auctioning off about 30 pieces of what it describes as surplus laboratory equipment.
The auction began May 21, about two weeks before the company filed for bankruptcy on June 7. The firm has hired Illinois-based auctioneer Ettin Group to manage the process.
In a prepared statement, HDL’s corporate counsel Douglas Sbertoli said the auction and sale of the equipment “will not impact our core business functions.”
Each piece of equipment up for grabs is used to test blood samples in some capacity, and the lot includes centrifuges, hydrogen generators and other machines. Each item is being auctioned off separately.
Court documents do not indicate what the potential proceeds of the auction could be for the company. The auctioneer is set to get up to $45,000 for its services, along with 15 percent buyer’s premium on each item sold.
Variations of the model of centrifuge included in HDL’s auction can cost upwards of $10,000. Many of the other pieces included in the auction are advertised through third parties as costing more than $1,000.
The hearing to approve the continuation of the auction is set for Monday. The auction is scheduled to stay open to bidders through June 26.
Selling the excess equipment will leave even more empty space in HDL’s 283,000-square-foot downtown headquarters at 737 N. Fifth St., following several rounds of layoffs that reduced the building’s headcount over the last year.
“The primary reason that there is excess capacity in the building is simply because the anticipated growth and expansion needs initially forecast have not materialized as quickly as contemplated,” Sbertoli said.
The company also appears to be making room for potential new tenants in the building. Biotech 8 LLC, which owns the property, filed a $152,000 building permit with the city for a tenant up-fit in its building in late May.
The building permit calls for a “light remodel of existing tenant space to include demo and reconfiguration of existing office.”
HDL owns a 58.9 percent interest in Biotech 8.
Sbertoli declined to confirm whether or not a new tenant is moving into the building.
“Business and space planning efficiencies are also being evaluated to make better use of the floorplan,” Sbertoli said. “There is demand for laboratory and associated office space in the Richmond market, and the facility we currently lease is an attractive and highly desirable location.”
In addition to a hearing over the auction, HDL will also go before bankruptcy court Thursday to seek approval of an agreement with the federal government to lift an administrative freeze on Medicare payments it is owed.
The government, according to court records, began the freeze shortly after HDL’s bankruptcy filing in order to preserve its ability to recoup overpayments it made to the company. HDL claims it is owed $2.6 million from Medicare for payments that should have been made in the days before it declared bankruptcy but that hadn’t yet been processed by the government. Medicare payments are processed up to 14 days after a claim is approved.
About 40 percent of HDL’s total revenue comes from Medicare payments, court documents state, making it “critical that the Debtors continue to receive these payments during the pendency of these chapter 11 cases.”
Under the terms of the agreement, the U.S. will lift the freeze. In exchange, its claims against HDL, which include Medicare overpayments and a $47 million settlement fee that stemmed from a kickback investigation, are to be considered secured claims in the bankruptcy. HDL will also provide the government with weekly updates specifying how much the company has billed Medicare.
In the past several weeks, HDL has also secured a lender willing to provide debtor-in-possession financing during the bankruptcy process. New York-based Cerberus Business Finance is willing to provide revolving credit of up to $30 million, pending approval during the Monday hearing.
The once fast-growing downtown laboratory company sought Chapter 11 bankruptcy protection earlier this month after a turbulent year that included a federal investigation, several multimillion-dollar lawsuits and being cut off by its main lender.