Skilled nursing provider Absolut Care — and some of its subsidiaries — filed for Chapter 11 bankruptcy on September 10 in the U.S. Bankruptcy Court for the Eastern District of New York.

The East Aurora, N.Y.-based company operates six SNFs and one assisted living facility in the Empire State, with approximately 975 employees, according to the declaration of chief restructuring officer Michael Wyse in support of the Chapter 11 petition.

Buffalo Business First initially reported the news on Wednesday.

Absolut received approval to close one of the facilities, Absolut Care of Orchard Park in the Buffalo suburb of Orchard Park, N.Y. The other facilities, however, will stay open and continue to conduct normal operations, according to a release from Absolut.

“The debtors intend to use these Chapter 11 cases to evaluate their leases and other obligations and, to the extent possible, restructure them in such a way that will afford the debtors an opportunity to emerge from bankruptcy, with all of their senior care facilities intact, as a going concern,” Wyse wrote in the declaration.

A phone call to Wyse was not returned as of press time.

For its seven facilities, Absolut paid approximately $11 million a year to its landlords, affiliates of the Arba Group in Los Angeles — an amount that Absolut characterized as “well above the market rate for comparable facilities.”

“That crushing rent burden has made the Debtors’ business, in its current footprint, unsustainable,” Wyse wrote in the declaration. “Not only has the high rent burden put a stranglehold on the debtors’ cash flow, it is impeding the debtors’ ability to invest in the improvement of their facilities.”

The Arba Group told Skilled Nursing News that it had no comment for this story.

In terms of secured debt, some of the Absolut entities owe approximately $5 million to the pre-petition lender, Capital Funding Group, under a Department of Housing and Urban Development (HUD) pre-petition loan agreement. Different entities owe approximately $700,000 to Capital Funding Group under a non-HUD pre-petition loan agreement.

Capital Funding Group also had no comment.

In addition, Specialty Rx Inc. asserted a lien against the debtors, citing a debt of about $2.57 million; the debtors are assessing the lien, according to the declaration.

Absolut and its affiliates owe trade creditors approximately $10.45 million in unsecured debt, with the landlords asserting that the debtors owe unpaid rent of about $2.98 million — plus fees, costs, expenses, and other charges. The debtors are disputing that amount, according to the declaration, but also owe approximately $4.05 million in pre-petition taxes, about $2.16 million in assessments under New York’s Health Receipts Cash Assessment Program, and other amounts in loans related to funding capital improvements.

Facility improvements are critical to maximizing Medicare and Medicaid reimbursement rates, Wyse wrote, but those revenue sources have also led to difficulties: Delays in processing Medicare and Medicaid reimbursement payment have forced the debtors to wait for “many months and sometimes years” to receive approval and payment.

The declaration also claimed that even if the reimbursements were made in a timely fashion, the amount would fall short of the costs, a particular issue since the leases were first drawn up when reimbursement was higher.

The filing additionally blamed the competitive senior health care market and tort litigations against the debtors; obtaining “a breathing spell from these litigations” to attempt to resolve them was part of the reason for seeking bankruptcy, according to the declaration.

The company has secure debtor-in-possession financing in the form of a $2 million revolving line of credit — provided by a lender affiliated with Israel Sherman, the CEO of Absolut Care. The debtors had tried to identify new capital providers and post-petition lenders, according to the declaration, but did not receive any other offers for post-petition financing, according to the declaration.

“More specifically, the debtors reached out to over 20 different lenders who typically lend in distressed situations regarding the possibility of post-petition financing. None of these lenders agreed to provide any funding at this time,” Wyse wrote in the declaration. “Indeed, only [six] signed a non-disclosure agreement, and ultimately none other than the lender expressed any interest in considering making a loan of any nature to the debtors in the timeframe which the debtors needed to obtain financing.”