Erickson to be sold to private investment firm, files for bankruptcy
Erickson Retirement Communities, a manager and developer of large, campus-style retirement communities, has signed an agreement to be sold to Redwood Capital Investments LLC, a private investment company. The sale price was undisclosed.
To complete the transaction, Erickson must restructure its debt. As a result, it filed for Chapter 11 bankruptcy Monday, spokesman Mel Tansill said. The company expects that the transaction will be completed in the first quarter of 2010.
Besides restructuring its debt, the voluntary Chapter 11 petition also will allow the company to reorganize its core management and real estate businesses into separate but commonly owned legal and financial entities, Tansill said. This will help to protect existing and future residents from volatility in the real estate market and allow the company to resume building in developing communities as the economy recovers.
“This transaction allows Erickson to manage through the current difficult economic environment so the business can regain its financial footing and continue its mission to provide quality lifestyle for community residents, while also safeguarding residents' financial security,” said John Erickson, company founder and chairman, in a company statement.
Erickson has been struggling with a heavy debt load—a result, in part, of the recession. It disclosed earlier this month that it had signed a letter of intent with a prospective investor, but it noted at the time that it had to restructure its debt before a transaction could occur. Tansill said Monday that the company was unable to reach an out-of-court agreement with certain of its creditors.