Pacifica Hospital Files Chapter 11 as $50.9M Lender Fights Cash Use

Pacifica of the Valley Corporation, operator of Pacifica Hospital of the Valley, an open general acute-care hospital with 231 licensed beds in Sun Valley, California, filed chapter 11 on July 4, 2026 in the U.S. Bankruptcy Court for the District of Delaware, case No. 26-11060. Four days into the case, secured lender Axios Capital Solutions, LLC has objected to the debtor's cash-collateral motion, disputes the hospital's corporate authority to file, and has previewed a motion to dismiss the case entirely.

Pacifica told the court it had only $240,797.86 in unrestricted cash on the petition date, with essentially no reserves and heavy reliance on government health care receivables. The hospital listed more than $100 million in liabilities, and cited COVID-era financial problems and the Axios lender dispute as drivers of the filing. Judge Thomas M. Horan is presiding. The court entered an interim order on July 9, 2026 authorizing the debtor to use cash collateral through July 24, 2026 while Axios's challenge to the case continues; the debtor has not yet identified a sale process, plan, or disclosure statement.

Debtor	Pacifica of the Valley Corporation, d/b/a Pacifica Hospital of the Valley
Court	U.S. Bankruptcy Court, District of Delaware
Case Number	26-11060
Petition Date	July 4, 2026
Judge	Hon. Thomas M. Horan
DIP Facility	None; court entered an interim cash-collateral order on July 9, 2026 authorizing use through July 24, 2026, with a final hearing scheduled

Open the public case profile for docket context, hearings, advisors, and plan updates.

COVID Losses, Seismic Fines, and the Change Healthcare Fallout

Pacifica's first-day declaration, submitted by CEO and President Precious Mayes, attributes the filing to a combination of operating, regulatory, and litigation pressures built up over several years. The hospital operated as a COVID-19 surge center while receiving minimal reimbursement, and it separately absorbed elevated traveling-nurse costs and billing pauses. Cash collection was further disrupted by the February 2024 Change Healthcare cyberattack, an industry-wide outage that delayed claims processing across U.S. hospital systems.

Seismic compliance has been a recurring drain on the hospital's finances. Pacifica missed state-mandated retrofit deadlines and has incurred approximately $9 million in fines through June 2026, while also losing 38 skilled-nursing-facility beds tied to the same compliance issues. The declaration also points to reductions and delays in government support payments, including funding tied to the state's Hospital Quality Assurance Fee (HQAF) and disproportionate-share hospital (DSH) programs, along with litigation involving the Main Street Loan and a pending receivership motion against the hospital. Pacifica is heavily dependent on Medi-Cal and government-payment programs; the declaration states that Medi-Cal accounts for approximately 85% of the hospital's revenue and patient volume. Mayes stated that chapter 11 was necessary to protect patient care and employees, maintain hospital operations, and preserve going-concern value while addressing a liquidity crisis and legacy liabilities.

Main Street Loan and the Axios Capital Dispute

The debtor's principal secured obligation is a $35 million senior secured Main Street Loan originally extended by First Western Trust Bank and now held by Axios Capital Solutions, LLC, according to the first-day declaration. Pacifica also owes approximately $9.5 million to landlord entities under a master lease and approximately $7.5 million to the Local Initiative Health Authority for Los Angeles County, known as L.A. Care, in connection with agreements tied to future HQAF payments.

Axios disputes both the size of its claim and the debtor's authority to be in bankruptcy at all. In its July 8 limited objection, Axios said it is successor in interest to First Western Trust Bank on the Main Street Loan and asserted an outstanding balance of at least $50,878,944 — roughly $16 million above the loan's original principal. Axios claims a perfected first-priority security interest in substantially all of the debtor's assets under a December 10, 2020 pledge and security agreement, plus a separate perfected security interest in 100% of the debtor's equity interests and related proceeds.

Cash Collateral Fight and Axios's Objection

With no debtor-in-possession facility identified in the docket, Pacifica's liquidity plan runs entirely through a cash-collateral motion seeking interim authority to use cash, receivables, and other section 363(a) collateral through August 1, 2026, pending a final hearing. The debtor named Axios, four landlord entities — Reliq Pacifica LLC, Beverly Gemini Investments LLC, Taking the 5th LLC, and Fifth/Arizona Investors, LLC — and L.A. Care (as to HQAF proceeds only) as the asserted secured parties for cash-collateral purposes. Proposed use is bound by a four-week budget with cumulative operating variances capped at 20%; exceeding that threshold would trigger a termination event. The proposed adequate-protection package includes replacement liens for any diminution in collateral value, a section 507(b) superpriority claim subordinate to the carve-out, reporting and information-rights obligations, and CRO oversight requiring personal authorization of expenditures and bank withdrawals, with no payments permitted to directors or owners.

Axios consented only to a two-week window of limited operating use in its July 8 objection, opposed any use of cash collateral to pay professional fees, and withheld consent to final cash-collateral use. The lender reserved rights to seek discovery and raise further objections, and stated it intends to file a motion to dismiss the case based on an alleged lack of corporate authority to file the petition. The amended July 8 hearing agenda listed the cash-collateral motion for an interim order alongside Axios's objection. On July 9, 2026, the court entered an interim cash-collateral order authorizing the debtor to use cash collateral through July 24, 2026 in accordance with its four-week budget, granting replacement liens and a section 507(b) superpriority administrative claim as adequate protection, and scheduling a final hearing. The order recited that all objections to interim relief had been withdrawn, resolved, or overruled.

Unsecured Creditors and Government Claims

Pacifica's list of 30 largest unsecured creditors is dominated by government agencies rather than trade vendors. The Internal Revenue Service holds the largest listed claim at $45,448,272.29, followed by the California Department of Health Care Access and Information at $9,264,338.72, the Employment Development Department at $7,281,783.32, the Los Angeles Department of Water and Power at $5,782,380.44, and the Emergency Medical Services Authority at $4,650,000, which the debtor marked as disputed and unliquidated. Other large listed claims include Larry Tablante at $3,275,400, the City of Los Angeles Office of Finance at $2,773,891.46, the California Department of Tax and Fee Administration at $2,457,311.33, M G Industries at $2,167,076.58, and McKesson Medical Surgical, Inc. at $1,886,636.35. The list is an early unsecured snapshot rather than a full scheduled-claims register; the voluntary petition checked the debtor's estimated-liability range at $100 million to $500 million.

Workforce Obligations and Patient-Privacy Procedures

Pacifica reported approximately 697 employees, including registered nurses, technicians, housekeeping staff, and food-service workers, with roughly 597 represented by SEIU-121RN and SEIU-UHW. Its employee obligations motion seeks authority to pay prepetition wages and benefits in the ordinary course, capped at $17,150 per employee on an interim basis, with total requested authorization of $12.322 million. The debtor estimated approximately $1.49 million in accrued prepetition wages and paid leave, approximately $2.331 million in average gross monthly payroll, and approximately $4.906 million owed to independent-contractor physicians, on top of payroll-service, health-plan, and retirement obligations. The motion states that payroll runs on two alternating bi-weekly cycles and identifies employee continuity as critical to patient care and estate value.

Separately, Pacifica sought authority in its cash-management motion to continue operating its existing system of 13 bank accounts without disruption. The court also entered an order authorizing patient-privacy procedures on July 8, permitting the hospital to omit patient names from the creditor matrix and certificates of service, use coded patient identifiers in schedules and statements, and limit disclosure of a separate patient list except to the court, the U.S. Trustee, or by further court order.

Claims Administration and Case Professionals

Pacifica applied to retain Kurtzman Carson Consultants, LLC d/b/a Verita Global as claims and noticing agent effective July 4, 2026, citing an expected notice population of more than 3,000 entities. The court granted the application by order entered July 8, authorizing Verita to administer proofs of claim, maintain the official claims register, record claim transfers, and operate a public-facing claims website and call center. No bar date has been entered as of the docket reviewed.

Dentons US LLP represents the debtor, with attorneys John D. Beck, Tania M. Moyron, Samuel R. Maizel, Casey Doherty, and Henry Thomas appearing in pro hac vice filings. Axios is represented by Raines Feldman Littrell LLP, including Hamid R. Rafatjoo and Carollynn H.G. Callari.

Key Timeline

Date	Event
July 4, 2026	Pacifica filed its chapter 11 petition in Delaware.
July 6, 2026	The debtor filed its top-30 unsecured creditor list; Axios appeared through Raines Feldman Littrell LLP.
July 7, 2026	First-day motions filed, including cash management, employee obligations, cash collateral, and Verita's claims-agent retention.
July 8, 2026	Axios filed its limited objection to cash-collateral use.
July 8, 2026	The court entered the patient-privacy procedures order.
July 8, 2026	First-day hearing held before Judge Horan on the debtor's first-day motions, including interim cash-collateral use.
July 9, 2026	The court entered an interim cash-collateral order authorizing use through July 24, 2026, granting adequate-protection liens and a superpriority claim, and scheduling a final hearing.

Frequently Asked Questions

Who is the claims agent for Pacifica of the Valley Corporation?

Kurtzman Carson Consultants, LLC d/b/a Verita Global. The court granted the debtor's retention application by order entered July 8, 2026, effective as of the July 4 petition date. No bar date had been entered as of the docket reviewed.

Does Pacifica have a debtor-in-possession loan?

No. The debtor moved to use cash collateral rather than obtain a DIP facility. The court entered an interim order on July 9, 2026 authorizing cash-collateral use through July 24, 2026 and scheduling a final hearing; Axios Capital Solutions had consented only to limited operating use and opposed professional-fee use before the order recited that all interim objections were withdrawn, resolved, or overruled.

Who is Pacifica's largest secured creditor?

Axios Capital Solutions, LLC, successor to First Western Trust Bank on the $35 million Main Street Loan. Axios asserts an outstanding balance of at least $50,878,944 and a first-priority lien on substantially all of the debtor's assets and equity.

Is Pacifica Hospital of the Valley still operating?

Yes. The first-day filings, including the cash-management and employee-obligations motions, are structured to keep hospital operations running without disruption while the chapter 11 case proceeds.

Other California hospital chapter 11 cases have followed different paths out of financial distress. Prospect Medical Holdings restructured a multi-state hospital portfolio, while Steward Health Care faced billions in lease obligations across 31 hospitals. Mercy Hospital Iowa City ended in liquidation after a secured-creditor dispute, and St. Margaret's Health reached a confirmed sale outcome.