Troubled nursing home chain Petersen Health Care is close to completing the sale of a substantial portion of its facilities, pending court approval.

All but five facilities of the Illinois-based nursing home chain, which filed for bankruptcy in late March, may be sold through Petersen Acquisitions LLC, a Delaware-based limited liability company, and were put up for auction on July 2 in a deal estimated to be over $116 million. 

The sale will be facilitated through a “stalking-horse” bid arrangement, which sets a floor for bidding on a company’s assets, according to court documents shared in a report by the Peoria Journal Star.

The transaction, currently pending approval in federal bankruptcy court in Delaware, includes the sale of 28 facilities to Petersen Acquisitions LLC. These facilities were acquired from various lenders: X-Caliber Funding and Lument Finance Trust provided $24 million for 20 facilities; Grandbridge Real Estate Capital extended $6 million for three nursing homes; and Kewanee-based Community State Bank secured two local facilities for $360,000.

Additional sales during the July 2 auction involved five facilities being sold to different bidders. HP Developers, LLC purchased properties in Canton, Monmouth, and Sullivan for a combined $14.5 million, while Bank of Farmington acquired a facility in its city for just over $3 million. Hickory Point Bank and Trust finalized the auction with the purchase of a Girard facility for slightly over $2 million.

Despite the progress towards finalizing the sale, hurdles remain amid Petersen Health Care’s ongoing legal disputes and financial restructuring efforts that have caused delays in the sale of its facilities. 

A hearing scheduled for Wednesday in Wilmington, Delaware, will review objections from several debtors, including concerns from X-Caliber about consent and notification processes, and objections from GMF Petersen Note LLC regarding bid transparency and timing constraints.

A spokesperson for X-Caliber told Skilled Nursing News that it filed a notice of non-consent to the bid realized at the auction.

“We have opted to exercise our legal right and forgo acceptance of the auction bid to ensure the best outcome for our stakeholders and investors while maintaining stable operations of the facilities,” the spokesperson said.

Meanwhile, GMF Petersen Note LLC criticized the sale process, arguing that the $118 million price tag significantly undervalued Petersen’s assets compared to initial estimates ranging from $216 million to $305 million at the outset of bankruptcy proceedings.

Moreover, the federal Department of Housing and Urban Development (HUD) filed a motion against the sale, citing regulatory concerns and the bid’s inability to cover outstanding balances on HUD-insured mortgages.

In filing for Chapter 11, Petersen Health Care cited financial difficulties exacerbated by challenges in the home health-care sector, inflation pressures, staffing shortages, and the aftermath of a significant data breach in October 2023. Despite earlier projections of potentially raising $300 million through facility sales, the company has faced substantial debts totaling over $290 million.