Orianna Close to Wrapping Bankruptcy as Former Owner Returns to Fold

Orianna Health Systems, a skilled nursing operator that entered a protracted and litigious bankruptcy last year, will effectively cease to exist after its plan of liquidation was confirmed last week.

In a separate process, the company also transferred the ownership and the operations of 15 remaining facilities owned by the bankrupt operator, legally known as 4 West Holdings, Inc.

The transfer to the new owners was done through a Section 363 sale separate from the confirmation of the plan of liquidation, which occurred last week, Louis Robichaux IV, senior managing director at the consulting firm Ankura and chief restructuring officer at Orianna, told SNN.

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“Sometimes the effect of the plan confirmation is to effectuate the sale,” he told Skilled Nursing News. “In this case, the sale would have been confirmed, whether the [liquidation] plan was confirmed or denied.”

Of the 15 old Orianna facilities that were transferred, 14 are located in South Carolina, with the remaining building in Georgia, Robichaux said. With the closing of the sale, Orianna will operate one remaining nursing home for a short period of time, though it will eventually transfer operations to a successor and has already rejected the lease of that remaining property.

Under bankruptcy protection, tenants can seek to either affirm or reject the leases as part of the wind-down process. Should they choose the latter option, they can essentially walk away from the property, allowing the landlord to select a new operator.

“At that point, the debtor for all practical purposes will cease to exist, and on the effective date of the plan, all the assets of the debtors will get transferred to a liquidating process,” Robichaux said.

The facilities were purchased by the entity SC-GA 2018 Partners LLC for a net purchase price of $178 million, $30 million of which is the form of a note and the rest in cash, he explained. This was a slight reduction from the number in the original asset purchase agreement because real estate investment trust (REIT) Omega Healthcare Investors (NYSE: OHI), one of Orianna’s major landlords, decided not to sell four facilities that were part of the Laurel Baye lease. Those four facilities were transferred to successor operators designated by Omega.

It was disclosed in court that Harris Schwartzberg — one of Orianna’s former owners — is among the investors or owners in the purchaser of the properties, Robichaux added.

The sale, however, is separate from the plan of liquidation, which the court officially signed on Monday.

Orianna entered voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the Northern District of Texas in March 2018. At the time, the company and its affiliates operated 43 SNFs with about 4,500 beds in seven states, and Omega had entered a restructuring support agreement with the operator.

Omega, however, said in July 2018 that it would terminate its involvement in the restructuring deal, citing frustration with the process and a desire to protect shareholders. Orianna fired back afterwards, calling the step “unjustified and inconsistent with its agreements.”

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