Genesis HealthCare has filed for Chapter 11 bankruptcy protection, listing its 298 affiliated holding companies, ancillary businesses and insurance vehicles in its submission to the U.S. Bankruptcy Court for the Northern District of Texas Dallas Division. It is one of the largest skilled nursing operators in the country and operates 218 facilities in 19 states. In the bankruptcy filing, there is a proposed transaction that would result in a current company investor, ReGen Healthcare, LLC, acquiring the operations. Terms of that deal will be disclosed soon, but any deal would be subject to higher bidding and approval.
Genesis also revealed that it has secured a commitment of $30 million in debtor-in-possession (DIP) financing, from its existing secured lenders, which, subject to court approval and in combination with cash on hand and cash flow generated from ongoing operations, would support the business to satisfy its ongoing obligations, maintain staff positions and keep delivering care during the process. Omega Healthcare Investors announced that it would provide $8 million of the DIP financing.
The company cited its “legacy liabilities associated with previously divested operations,” as the impetus for the filing, and its issues with liabilities may go back to 2011, when JER Partners and Formation Capital sold the real estate assets of Genesis’s 147 facilities to Welltower (then, Health Care REIT) for $2.4 billion (see that deal here), hampering the portfolio with escalating lease and high debt payments. It has been trying to right the ship ever since, but the pandemic resulted in a going concern notice from the company in late 2020. That was soon followed by Welltower’s exit from the operating relationship with Genesis in early 2021 (see our story on it here), after the REIT had already been divesting its Genesis assets for years.
At that time, ReGen Healthcare made a $50 million debt investment in Genesis that would convert into a 25% equity interest on a fully diluted basis, and in conjunction with the cash injection, Genesis removed itself from the NYSE. Other potential capital infusions would also increase its ownership share, and ReGen appointed two board seats at the time. ReGen is affiliated with Pinta Capital Partners, a private equity firm founded by Allure Group owner Joel Landau.
