Genesis HealthCare announced Wednesday it will voluntarily delist its common stock from the New York Stock Exchange as part of a restructuring plan to improve the company’s financial and operational stability damaged by the pandemic.
The moves by the former largest U.S. nursing home chain were not entirely unexpected, given other investors’ flight from it and its own dire forecasts in 2020. The Genesis action also could be a precursor for others who are flirting with financial danger to make needed recalibrations, according to one expert.
Pennsylvania-based Genesis announced its three-part restructuring plan on Wednesday, the morning after major landlord Welltower REIT announced it was severing virtually all ties with the chain. Genesis plans to file to delist from the New York Stock Exchange in mid-March, and deregister its stock and suspend its public reporting obligations in late March.
The Genesis restructuring plan includes an agreement with ReGen Healthcare LLC for a capital infusion of $50 million and a deal to terminate its master lease with Welltower covering 51 facilities. The latter move was first announced by Welltower late Tuesday evening.
Genesis currently is $423 million in debt to Welltower. Genesis will receive about $86 million as terms of the massive real estate agreement and approximately $170 million in additional debt reductions when other mileposts are reached. In all, Genesis expects to reduce its outstanding debt by $264 million.
Industry in distress
Forbes columnist Howard Gleckman suggested Wednesday that the restructuring and breakup of Genesis and Welltower is “an indication of the industry’s distress.”
“Despite tens of billions of dollars in federal bailout money, the industry is in serious jeopardy. Some observers predict as many as half of operators will fail without major changes in their business model,” he noted.
“The Genesis-Welltower split does not mean the end of the for-profit nursing home industry by any means. Some large publicly traded chains, as well as some regional chains, appear to be navigating the pandemic better than Genesis has. But their divorce is an indication of the industry’s distress,” Gleckman concluded.
Genesis’ deal with ReGen Healthcare gives the company a 25% ownership interest in Genesis’ subsidiaries. ReGen can increase its ownership stake to up to 43% if it makes an additional debt investment of $25 million by mid-April. ReGen also appointed two members to Genesis’ board.
Genesis CEO Robert Fish said the restructuring moves “improve the financial and operational stability of the Company significantly and build on the encouraging signs we are seeing as COVID-19 case rates continue to materially decline and residents, patients and staff are vaccinated.”