Carlyle Group Reportedly Set on ManorCare Sale to QCP

The private equity firm that has owned skilled nursing provider HCR ManorCare for the past decade is currently in the process of “ceding control” to its landlord, Quality Care Properties, Inc. (NYSE: QCP), either through bankruptcy or an out-of-court settlement, the New York Post reported Sunday.

Citing unnamed sources, the Post reported that Toledo, Ohio-based ManorCare’s creditors are “in advanced talks” with real estate investment trust (REIT) QCP to take over the struggling chain from the Carlyle Group, which originally purchased the company in 2007. QCP has previously disclosed that it’s mulling a potential equity takeover of ManorCare, but the deal now appears to be imminent, with Carlyle Group committed to stepping away from any ownership in the skilled nursing giant, according to the Post report.

Last week, the Bethesda, Md.-based QCP announced in an SEC filing that it was actively courting ManorCare’s lenders for about $500 million in funding to help execute an equity takeover of the company, indicating that the REIT’s executives wanted a firm commitment from the lenders by June 15.

Carlyle has essentially washed its hands of the situation, with QCP already plotting to shutter ManorCare locations in Ohio, Pennsylvania, Florida, and “other states” after it takes over, the Post’s sources now say. 

However, a source close to the situation told Skilled Nursing News that no closures are expected as the result of any deal, with all three parties working hard to avert bankruptcy.

Trouble has been brewing at ManorCare for years. Its major landlord previously was Irvine, Calif.-based HCP Inc. (NYSE: HCP), but that “big three” REIT spun off the beleaguered ManorCare portfolio into QCP last year. Since that time, the situation has deteriorated further.

Jim Pagoaga, who headed ManorCare’s rehabilitation division, left the company on June 1, according to an e-mail obtained by the Post; that same ManorCare arm is under investigation by the Department of Justice over the alleged exploitation of senior residents. The paper also claimed to have obtained internal ManorCare e-mails announcing the departure of vice presidents John Graham and Mike Ferguson.

ManorCare and QCP entered a forbearance agreement earlier this year that would help the SNF operator meet its rent agreements. But ManorCare came up well short of its June rent, and the Post reported that its CEO was demanding the immediate payment of a $100 million deferred settlement stemming from Carlyle’s takeover of the company back in 2007.

QCP currently owns 257 SNFs in 29 states, according to its most recent quarterly report.

Carlyle declined to provide comment, while ManorCare did not respond to a request from Skilled Nursing News as of press time; a spokesman for QCP said the company had no comment.

Written by Alex Spanko

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Alex Spanko
Assistant Editor at Aging Media Network
Alex covers the skilled nursing and reverse mortgage industries for Aging Media. Outside of work, he reads nonfiction, yells at Mets games from his couch, and enjoys pretty much any type of whiskey or scotch — often all at once.

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