September 20, 2023 – The Debtor filed a motion to extend the periods during which it has an exclusive right to file a Plan, and solicit acceptances thereof, through and including December 6, 2023 and February 5, 2024 [Docket No. 250]. Absent the requested relief, the Plan filing, and solicitation periods are scheduled to expire on October 9, 2023 and December 7, 2023, respectively.
The Debtor's motion is frugal in its provision of detail, but does provide a few salient facts in what it posits is a complex case presenting "challenging circumstances." The Debtor, the operator of one of the largest CCRC's in Illinois (the “Friendship Village of Schaumburg”), owes secured creditors over $220.0mn; it also has 635 residents that it somehow needs to entice to remain at their facility, notwithstanding that any Plan proposed will leave resident deposits (in aggregate undoubtedly well over $100.0mn, although the Debtor is cagey about what it holds) dramatically slashed. That will clearly leave residents, and their families/estates, deeply unhappy, but is there a Plan that will keep them from being so unhappy (unincentivized to stay) that they leave Schaumburg?
The difficulty of the Debtor's balancing act was underscored on September 15th when they announced that they would proceed with an $83.11mn (cash) stalking horse bid from a purchaser extremely intent on remaining anonymous (see our earlier coverage). That purchaser will be raising fees and providing nothing in the way of resident deposit refunds to any resident that refuses to sign on to a new residency agreement and only 20% to those who do sign a new contrat but don't stay a further 3 years at the facility (those who make it through 15 years, theoretically in line for 100% of their deposits). The purchaser's asset purchase agreement stipulates that it can back out of the deal if the Debtor can't get 80% of its residents to make the switch.
All in all a daunting sale process (two sales really, the first to residents and the second to the purchaser…or topping bidder) the terms of which will dictate the contents of the Debtor's Plan. No wonder the debtor provides in its motion that it needs more time to "include disclosures relative to the events in the Sale Process that will occur in October and November 2023 and…adjust certain provisions of Debtor’s proposed Plan…the relief requested herein is necessary given the unresolved and inescapable contingencies arising from the Sale Process."
Case Status
On June 9, 2023, Evangelical Retirement Homes of Greater Chicago, Incorporated, dba Friendship Village of Schaumburg, (“Friendship Village of Schaumburg” or the “Debtor”) filed for Chapter 11 protection noting estimated assets between $10.0mn and $50.0mn; and estimated liabilities between $100.0mn and $500.0mn. At filing, the Debtor, operator of Illinois’ largest continuing care retirement community (“CCRC”) summed up its predicament: “In February of 2020, the Debtor was meeting its census and operating goals. Debtor was among the largest CCRC properties in the State. Its reputation for quality care of its Residents was well known. Then came Covid.”
On July 13, 2023, the Court hearing the Evangelical Retirement Homes of Greater Chicago, Incorporated case issued an order approving bidding procedures in relation to the sale of substantially all of the Debtor’s assets.
On August 11th, the Court issued a pair of orders authorizing the Debtor to: (i) access $3.0mn in new money, debtor-in-possession (“DIP”) financing being provided by Friendship Senior Options, NFP* (the “DIP Lender”) [Docket No. 205, with DIP Term Sheet attached at Exhibit 1] and (ii) continue using cash collateral [Docket No. 207].
*Friendship Senior Options, NFP was listed on the Debtor’s Chapter 11 Petition as the holder of 10% or more of the Debtor’s equity interests.
On September 15, 2023, further to the Court’s July 13th bidding procedures order [Docket No. 153], the Debtors filed an executed stalking horse asset purchase agreement (the “APA”) entered into with IL CCRC LLC (the “Stalking Horse Bidder*” or “Purchaser,” $83.11mn cash purchase price) [Docket No. 247, with copy of the Stalking Horse Purchase Agreement attached at Exhibit A].
The Extension Motion
The extension motion [Docket No. 250] states, “This Chapter 11 Case is (a) large, with approximately $220 million of debt including, without limitation, indebtedness due to bondholders, vendors, and current and former residents of the Campus, and (b) complex, especially because that Debtor’s operations are subject to significant state and federal healthcare regulations.
The Debtor’s Chapter 11 Case is governed by a thoughtful and negotiated process for the sale of the Campus (the 'Sale Process') … The Sale Process establishes November 1, 2023, as the sale hearing date and contemplates a sale closing by December 31, 2023. Other key deadlines and dates will occur in October with each such key deadline or date occurring after October 9, 2023, which is the first business day that follows 120 days after the Petition Date. Accordingly, the Debtor requests an additional sixty (60) days to provide the Debtor with the opportunity to (a) include disclosures relative to the events in the Sale Process that will occur in October and November 2023 and (b) adjust certain provisions of Debtor’s proposed Plan, as appropriate.
The Debtor continues to work in good faith to achieve the best possible outcome in this Chapter 11 Case under the challenging circumstances that the Debtor now faces.
The Debtor has made progress in negotiations with its creditors as the provisions of the Sale Process unfold. The Debtor expects to continue sale related discussions with the Consultation Parties…and, as appropriate, the Debtor will engage in similar discussions with parties in interest with respect to the form and substance of the Plan, which will likely include provisions of the sale.
The Debtor is not seeking an extension of exclusivity to pressure creditors to concede to the Debtor’s demands. Instead, the relief requested herein is necessary given the unresolved and inescapable contingencies arising from the Sale Process.”
General Background
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Flynn Declaration”), Mike Flynn, the Debtor's chief executive officer, detailed the events leading to Friendship Village of Schaumburg’s Chapter 11 filing. The Flynn Declaration provides: “In February of 2020, the Debtor was meeting its census and operating goals. Debtor was among the largest CCRC properties in the State. Its reputation for quality care of its Residents was well known. Then came Covid.
Suddenly, area hospital beds were beginning to fill up with patients with severe flu-like symptoms. Inconsistent information about what was happening abounded. On March 20, 2020, Governor Pritzker ordered all but essential workers to stay at home. These developments dealt hard blows to the Debtor's business model, which was to promote active lifestyles for Seniors who now found themselves living behind closed doors, cut off from outside friends and family.
In the months that followed, the Debtor did what it could to cope with what had become a very hostile business climate for CCRC properties. After months of financial losses, the Debtor, which was financed by bondholders which had secured claims of more that $130 Million Dollars ($130,000,000.00), informed the Bond Trustee that Debtor could no longer afford to pay debt service on the bonds. This led to a decision which was concurred in by the Bond Trustee and the Debtor that it would be best for the everyone concerned, especially the Residents, if the Debtor could find another CCRC operator to affiliate with. So in March of 2021, the Debtor took steps to find a partner.”
About the Debtor
According to the Debtor: “Established in 1974 as a not-for-profit Continuing Care Retirement Community (also known as a Life Plan Community), Friendship Village, located in Schaumburg, is the largest community in Illinois. We provide exceptional living along with a lifetime continuum of care for adults ages 62 and older. We offer independent living, home care, assisted living, memory support, physical therapy and rehabilitation and skilled nursing care."
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The post Evangelical Retirement Homes of Greater Chicago, Incorporated – Seeks 60-Day Extension of Exclusive Plan Filing Period As It Ponders How It Will Present Painful Sale and Plan to Residents appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.