Six weeks after entering Chapter 11 bankruptcy, HCR ManorCare has won federal approval for its exit strategy.
U.S. Bankruptcy Judge Kevin Gross approved the $7.1 billion bankruptcy plan and a reorganization that will transfer ownership to its landlord, Quality Care Properties Inc., by the end of the year.
ManorCare, the nation’s second-largest skilled nursing chain, outlined its reorganization plans in early March, citing financial pressures such as the $446 million in rent owed to QCP — and an additional $39.5 million due every month.
The deal cleared a path forward for ManorCare, whose financial problems have been tied to declining public payments, escalating insurance rates, litigation and aging properties. Several analysts had warned the firm could go into receivership.
Quality Care, with just 10 employees and $318 million in annual revenue, is expected to close the deal in third quarter, putting it in charge of ManorCare’s 50,000-plus employees in more than 450 facilities.
Guy Sansone, former managing director and chairman of the Healthcare Industry Group at Alvarez & Marsal, was installed last month to “facilitate a smooth transition of leadership and ownership.” Reuters reports he will oversee the planned sale of 74 skilled nursing facilities.
ManorCare’s plan has received full support from other creditors and suppliers, who will get full payments under the deal.
Under the plan, which Gross approved Friday, the Carlyle Group, which bought a controlling stake in HCR ManorCare 10 years ago, will lose its equity.
The agreement also includes a $116.7 million settlement for ManorCare’s former chief executive of 30 years, Paul Ormond, who resigned last September in the midst of receivership threats.