A bankruptcy court judge formally signed off on Senior Care Centers’ plan of reorganization, enabling the beleaguered skilled nursing operator to continue operations with a fraction of the facilities it held at the time it entered Chapter 11 bankruptcy in December of last year.
U.S. Bankruptcy Judge Stacey G.C. Jernigan officially confirmed the plan on Friday, though she indicated in court on December 5 that the plan was approved, as reported by WSJ Pro Bankruptcy on that date.
It marks a new chapter for the operator, which filed for bankruptcy a year ago due to what it claimed were “burdensome debt levels and expensive leases.” At the time, the Dallas-based operator had more than 100 skilled nursing and independent/assisted living communities in Texas and Louisiana.
Under the plan of reorganization, Senior Care Centers will emerge with 22 facilities owned by five different landlord entities. Half of those will be owned by LTC Properties (NYSE: LTC), executives noted in their most recent earnings call.
According to the plan that was filed in October and approved Friday, those entities include: Annaly (CHI Javelin, LLC; CHI Javelin Winters Park, LLC; CHI Javelin Denison, LLC; CHI Javelin Frisco, LLC; CHI Javelin Allen, LLC; CHI Javelin Vista Ridge; and any applicable affiliates), Fredericksburg (J-S Fredericksburg Realty, LP and applicable affiliates), Hidalgo (Hidalgo Healthcare Realty, LLC and applicable affiliates), House Cross (HC Hill Country Associates, Ltd; H-C Associates, Ltd; HC-RW Associates, Ltd; and any applicable affiliates); and TXMS (TXMS Real Estate Investments, Inc. and any applicable affiliates).
Any other Senior Care Centers properties still under the company’s control will be transferred to new permanent operators or temporary managers by December 31, a source close to the case told SNN.
Annaly’s affiliates are all listed in a Securities and Exchange Commission filing as subsidiaries of Annaly Capital Management, Inc. (NYSE: NLY), a New York-based real estate investment trust (REIT). TXMS Real Estate Investments, Inc. is a subsidiary of LTC Properties.
The leases had been a considerable source of drama even before the official bankruptcy filing; during an earnings call in November 2018, one of the operator’s landlords, Sabra Health Care REIT (Nasdaq: SBRA) CEO Rick Matros said Senior Care Centers withheld rent as a negotiating tactic. Sabra terminated its leases with Senior Care Centers in November 2018.
LTC had tried to transfer its leases with SCC to a new operator shortly after the bankruptcy, but with no success.
“At this point, we wish them well and profitability in the future,” LTC CEO Wendy Simpson said on the REIT’s third-quarter earnings call. “They have asked us to approve the movement of a few beds to another of our facilities to maximize revenue for them, and so we have evidence that they are looking to the future and doing some strategic business planning.”