St. Vincent's Hospital won court approval to sell its 31-bed hospice unit to Visiting Nurse Service of New York Hospice Care.

Judge Cecelia G. Morris of the U.S. Bankruptcy Court in Manhattan signed off on the $9 million deal Tuesday, heeding the defunct New York hospital's warning that an extended sale process would be detrimental to patient care.

Court approval of the sale came over objections from the New York State Nurses Association union, which had sought more time to market the hospice unit in order to find a buyer that would assume its contract.

St. Vincent's, however, told the court that delaying the sale to hold an auction for the assets, as is typical in bankruptcy cases, could endanger patients.

"An expedited private transaction is necessary and in the best interests of...preserving both critical patient services and the value of the hospice," the hospital said in court papers.

St. Vincent's said the situation is so dire that the New York Department of Health indicated it will sign off on the transaction on an emergency basis.

The nurses' union said it was largely shut out of the sale talks and accused St. Vincent's of using its bankruptcy filing to scrap its contract.

In addition to caring for those with terminal illnesses in the hospital, the unit provides in-home hospice services to patients located in New York City's five boroughs.

St. Vincent's also obtained court approval this week to auction its Greenwich Village staff house.

Morris said Taconic Investment Partners' $48 million offer for the Sixth Ave. building can kick off bidding for the property. The judge also approved the hospital to pay Taconic an $870,000 breakup fee should the real-estate investment firm be bested at the auction.

A hearing to consider the sale is scheduled for July 1.

The building has for years housed the hospital's medical residents, but with St. Vincent's closure the property is no longer needed. Some 160 graduate medical residents and other staffers now live in the building. Their leases are up June 30.

Proceeds from the property sale are earmarked for a number of mortgage holders, including insurer Sun Life Assurance of Canada, which holds a $42.5 million first-lien mortgage on the property.

Also in line for proceeds from the sale are three medical malpractice trusts created during the hospital's last bankruptcy. Those trusts benefit people with medical malpractice claims against the hospital's staff.

St. Vincent's, founded more than 160 years ago, announced earlier this year it was insolvent and had to seek emergency funding from its lenders and borrow millions of dollars more from New York state to make payroll.

After failing to find a buyer that would keep St. Vincent's open, the health- care provider's board opted to pull the plug on the facility. The hospital's remaining buildings and operations are expected to be sold as part of the bankruptcy case.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)

-By Eric Morath, Dow Jones Daily Bankruptcy Review; 202-862-9279; eric.morath@ dowjones.com

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