Experts: ManorCare in for soft landing after bankruptcy
Save two top executives who are being replaced, no one at the company's
All of
"A prepackaged bankruptcy is simply an organized bankruptcy, one where they sit back and say 'what's logically going to happen in this case, and let's just do that.' It's in bankruptcy for a very short period of time, and it's an efficient way to achieve what you need to achieve in the case," said
In
ManorCare, which has about 1,700 employees locally and more than 50,000 nationally, has been struggling to keep up with its rent for the last two years, even as QCP agreed to reductions and deferments. Bankruptcy filings show ManorCare currently owes about
That debt would be wiped away in return for QCP taking over the company.
What happens once the bankruptcy deal is complete is more difficult to prognosticate. For QCP, this transaction is something akin to a fish swallowing a whale. In the company's most recent financial filing, it notes it has just 10 employees. And though the company has owned the real estate of skilled-nursing centers, its small executive team has no experience managing them.
"To be honest, I don't think they know what they're going to do," said
ManorCare says it operates about 500 assisted living, skilled nursing, and home-health and hospice centers under the ManorCare, Arden Court, and Heartland brand names.
Ahead of the bankruptcy filing QCP's chief executive officer
"
Experts say those appointments appear to be solid moves and that for the time being, very little is likely to change for
"The two people they brought in as far as I can tell have pretty solid backgrounds, so that's good," said
Quality Care's plans?
But
Already, QCP has said 74 noncore skilled-nursing or senior-housing facilities are being put up for sale with the proceeds going to pay off debt. That would leave ManorCare with an expected portfolio of 160 skilled-nursing facilities and 58 assisted-living facilities located in 18 states.
If QCP continues to operate ManorCare as one company at that level or close to it -- or finds a buyer to unload the whole operation -- experts say the chances are good that things continue in
"If they nibble around the edges, then there's a need for
Industry observers say a number of compounding challenges have led to this point for ManorCare.
When the company was purchased by private equity firm
"That's the root of this thing,"
ManorCare has also been hit by lower revenues from changes in the way federal government reimburses rehab facilities and nursing homes, as well as the impact of new accountability models that attempt to share costs and reduce rehab patients' lengths of stay in skilled nursing settings.
That has led to a notable decrease in revenues. Because ManorCare has been a private company, full financials aren't publicly available. But based on figures included in financial filings from QCP, ManorCare's revenues have slipped from
ManorCare officials were not available to speak with The Blade for this story, though earlier in March a company spokesman issued a statement that seemed to suggest the company would be profitable were it not for the rent obligations.
"
Finanical filings show ManorCare had paid
"They basically have lowered the debt level from the sky-high level where it was to something probably more reasonable,"
There's hope
Even so, there's no question skilled nursing businesses have been struggling. A number of ManorCare's competitors have either been through restructuring or been pushed close to it. And, at least for now, the regulatory reimbursement environment isn't changing.
Still, the hope seems to be that with ManorCare's well-regarded operations it can succeed under a different capital structure and cleaner balance sheet.
A judge still must approve the bankruptcy deal, though experts don't see many challenges to that happening.
"If you wanted to cut a deal so the landlord basically got the business, it makes sense to go then to all the other unsecured creditors and say 'we're going to make you whole,'"
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