An operator with 28 skilled nursing facilities in Florida, Georgia and Mississippi has filed for Chapter 11 bankruptcy, citing “significant fiscal challenges” stemming from the COVID-19 pandemic.
Pensacola, Fla.-based Gulf Coast Health Care LLC reported in documents filed in U.S. Bankruptcy Court for the District of Delaware that it has reached a proposed restructuring support agreement that involves transitioning the facilities to new operators.
Gulf Coast leases 24 facilities from certain indirect affiliates and subsidiaries of Omega Healthcare Investors, Inc. and four facilities from certain indirect affiliates and subsidiaries of Eagle Arc Partners LLC — formerly known as Blue Mountain Holdings, according to a formal declaration prepared by M. Benjamin Jones, chief restructuring officer for Gulf Coast Health Care and senior managing director at Ankura Consulting Group LLC.
The Wall Street Journal and Law360 first reported the news.
Jones asserted that Gulf Coast has experienced decreased resident occupancy levels, “crippling” staff retention issues, and an increase in expenses related to the COVID-19 pandemic.
While federal financial assistance has provided some relief from COVID-19 related losses and expenses, Gulf Coast has received “very limited” state assistance.
“Although the Company has taken steps in recent months to improve resident occupancy levels, maximize staffing efficiencies, and reduce their operation costs, these efforts have not come close to addressing the Debtors’ operating shortfalls. And, even more troubling, labor pressures not only persist, but appear to be worsening,” Jones wrote in the declaration.
Jones specifically referenced the Biden administration’s vaccine mandate in the court document, noting that while 79% of residents are fully vaccinated only approximately 45% of Gulf Coast’s employees are vaccinated.
These facilities have approximately 3,350 licensed beds, 2,244 residents and employ more than 3,100 in the local communities, according to the declaration.
Omega sent Gulf Coast a default notice on July 8 that stated it had applied a portion of its security deposit to the outstanding rent amounts and subsequently demanded more than $2.4 million within 10 days, according to the declaration.
On Aug. 10, Omega issued a second default notice and accelerated all rent due, demanding payment of nearly $217 million.
Gulf Coast owes approximately $376,000 in outstanding rent to the “Blue Mountain Landlords,” according to the declaration.
Omega CEO Taylor Pickett said during the REIT’s second quarter earnings call that “the combination of significant occupancy declines and a tight labor market with increasing wages and a shortage of staff has started creating liquidity issues for certain operators.”
Omega has previously shared that three operators have not been able to pay rent — amounting to 8.6% of the Maryland-based real estate investment trust’s (REIT) third quarter contractual rent and mortgage payments.
Neither Gulf Coast landlord responded to a request for comment.
Companies featured in this article:
blue mountain holdings, Eagle Arc Partners, gulf coast health care llc, Omega Healthcare Investors
