Oroville Hospital Moves to Extend Its $40M DIP Loan After the Claims Deadline Closed

Oroville Hospital and OroHealth Corporation reached an agreement July 27 with their debtor-in-possession lender and master trustee UMB Bank to amend the DIP loan documents and extend post-petition financing, subject to approval by the U.S. Bankruptcy Court for the Eastern District of California, Sacramento Division.

Why it matters: Oroville’s claims bar date closed June 8, and extending the DIP does not reopen it.

UMB Bank is both the accelerating bondholder and the DIP lender

The $40 million facility came together within hours after the court pushed back on the alternative.

• UMB Bank, acting as bondholder agent, provides the $40 million DIP facility, built from roughly $24 million in previously swept funds plus $16 million in new bondholder money.
• UMB Bank asserts a lien on substantially all hospital assets securing about $195.63 million in accelerated municipal revenue bonds issued through the City of Oroville in 2019.
• Judge Christopher M. Klein rejected a competing third-party DIP proposal at the December 11 first-day hearing, calling its terms “very onerous.” Contested DIP financing is a recurring feature of these cases, as the Brightline DIP race showed earlier this year.

A $27.1 million sweep pushed vendors to cash in advance

Oroville’s suppliers repriced their exposure nine weeks before the petition date.

• UMB Bank swept $27.1 million from hospital trust accounts on October 1, 2025, erasing the reserve Oroville had been operating against.
• Court testimony described vendors that stopped shipping chemotherapy drugs and insulin, and medical device suppliers that moved to withhold surgical equipment.
• Change Healthcare and Cardinal Health are listed among the largest unsecured claims at more than $15.4 million and $2.4 million, and contractor Modern-Sundt is pursuing over $16.8 million.

The claims deadline passed on June 8, 2026

The amendment moves the case milestones forward. It does not revive deadlines that already ran.

• The bankruptcy court set June 8, 2026 as the bar date for proofs of claim against Oroville Hospital and OroHealth.
• UMB Bank’s counsel told the court this is “a sale case, not a restructuring case,” and the hospital is now working a dual track of restructuring or sale. Creditors weighing their position should review the recovery options available in a Chapter 11.
• California’s attorney general must consent before a nonprofit hospital sells material assets under Corporations Code Section 5914, which any buyer has to clear before closing.

What to do now

Oroville is the second California hospital Chapter 11 we have covered this month, after Pacifica Hospital of the Valley, and suppliers to either one are making a fresh credit decision every week.

1. Confirm your proof of claim was filed before the June 8 bar date, then check the claims register for the amount and classification on record, because classification is what decides what an unsecured creditor actually receives in Chapter 11.
2. Separate your prepetition receivable from post-petition shipments in the ledger, and document the reasoning behind any move to cash in advance or shortened terms.
3. Notify your trade credit insurer of the filing and the overdue balance now, because coverage responds subject to credit limits, notification requirements, and policy terms in place at the time of the filing.
4. Contact Securitas Global Risk Solutions to review how your policy treats a debtor operating under an extended DIP facility.

Disclaimer:
This blog post is meant to be informative and provide helpful tips and insights into credit insurance policies. It is not meant to supersede any policy requirements. Please consult your credit insurance policy for all requirements including claim filing deadlines and required documentation.

Since 2004, Securitas Global Risk Solutions, LLC has helped clients develop trade credit and political risk transfer solutions. As an independent brokerage, Securitas is focused on developing comprehensive solutions that meet client needs, ensuring a complete understanding of policy wording and delivering excellent responsive service. If you want to understand how trade credit insurance can protect your business, contact Securitas Global Risk Solutions to speak with a specialist.