Mayflower Communities, Inc. – Luxury Senior Living Facility Files Chapter 11, Senior Residents Listed as Very Junior, ie Unsecured, Creditors

January 31, 2019 – Mayflower Communities, Inc. (“Mayflower,” d/b/a The Barrington of Carmel) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Northern District of Texas, lead case number 18-30283. The Company, a Delaware not-for-profit senior living community located in Carmel, Indiana and wholly-owned by Senior Quality Lifestyles Corporation (“SQLC,” itself a 501(c)(3) not-for-profit), is represented by Andrew B. Zollinger of DLA Piper. Further board-authorized engagements include (i) Ankura Consulting Group (“Ankura”) which will provide interim management services, (ii) Larx Advisers, Inc. as financial advisor, (iii) Cushman & Wakefield as investment banker and (iv) Donlin Recano as claims agent. Louis Robichaux of Ankura was also designated as the Company’s Chief Restructuring Officer.

The Company’s petition notes between 200 and 1,000 creditors; estimated assets between $50mn and $100mn; and estimated liabilities between $100mn and $500mn. Documents filed with the Court show that all 20 of the Company’s 20 largest unsecured creditors are residents at The Barrington of Carmel, each having claims (“contingent resident refunds”) between $400k and $536k. The filing points out that each of the resident’s personal details are being redacted in compliance with Health Insurance Portability and Accountability Act 1996 (“HIPAA”) rules. Residents might well prefer to be reassured as to the handling of their 6-figure deposits. Clearly the treatment of these senior (in age, if not priority) unsecured creditors will loom large as the case progresses, if only from a public relations perspective for non-debtor SQLC.

Texas-based SQLC which operates under the motto of “Everything in Life Should be Sensational” operates six facilities, five in Texas (Querencia, Mirador, The Buckingham, Edgemere and The Stayton) and the Debtor’s facility in Indiana.

Mayflower has yet to provide details as to the events leading up to the Chapter 11 Petition or what the Debtor/SQLC hope to accomplish with a restructuring, but a November 17, 2012 article from the Indianapolis Business Journal (“IBJ”) provides some detail as to the Debtor’s capital structure and may turn out to be insightful as to the events now unravelling across the country in a Texas bankruptcy court.

The IBJ article notes, “Construction on The Barrington began this fall [2012] after an August sale of tax-exempt bonds raised $119 million. The Barrington’s not-for-profit owner, Mayflower Communities Inc. (an affiliate of SQLC), used the city of Carmel as a conduit to issue the bonds, but no taxpayer dollars are at stake.” The article details the allegations and concerns of a former SQLC vice-president David Brown who “believed the Carmel market already was saturated with similar options.” Brown (fired by SQLC) also alleged conflicts of interest in the development of the project, allegations that were strenuously denied by SQLC and never proven. 

IBJ quotes SQLC’s CEO Charles Brewer, “Whether The Barrington would be viable was only a question in the mind of one person, who was a disgruntled former employee” and further notes “the two battled within SQLC before Brown was fired. Then the fight moved to Texas courts, after someone sent a disturbing letter to residents of SQLC’s Edgemere community in Dallas. The letter said SQLC was using Edgemere residents’ money to invest in the Indiana project.”

Whether the current bankruptcy case will revisit these conflict charges is uncertain; what is certain, however, is that the view of Mr. Brown’s attorney, Dusty Fillmore, may seem prophetic to residents who are now listed as unsecured creditors in the Mayflower case, “The failure of a project like The Barrington would be bad for residents, who pay refundable entrance fees of about $300,000, plus monthly service fees for a ‘life-care’ contract. It is our view that these continuing care retirement communities like SQLC use their tax-exempt status as a marketing tool. Residents, who usually sell their homes to come up with the entrance fee, assume the not-for-profit will protect their money…These residents own nothing but contract rights.”