Petersen Health Care IL, a nursing home chain facing significant challenges, is nearing the completion of a sale for a substantial portion of its facilities, pending court approval. This move comes after the Illinois-based company filed for bankruptcy in late March, signaling its financial struggles.
Auction Details and Financial Arrangements
The sale process involves Petersen Acquisitions LLC, a Delaware-based entity, which has put nearly all of Petersen Health Care's facilities up for auction, except five locations. The auction occurred on July 2, and the deal is estimated to exceed $116 million.
According to court documents reported by the Peoria Journal Star, the sale utilizes a "stalking-horse" bid arrangement. This type of bid establishes a minimum price for the assets being sold, ensuring that the auction process attracts serious buyers.
The proposed transaction, awaiting approval in Delaware's federal bankruptcy court, includes selling 28 facilities to Petersen Acquisitions LLC. Various lenders are financing this deal, including X-Caliber Funding and Lument Finance Trust, which provided $24 million for 20 facilities. Grandbridge Real Estate Capital extended $6 million for three nursing homes, while Community State Bank from Kewanee secured two local facilities for $360,000.
Competing Bids and Local Sales
Additional sales occurred during the July 2 auction involving five facilities purchased by different bidders. Notably, HP Developers, LLC acquired properties in Canton, Monmouth, and Sullivan for $14.5 million. Bank of Farmington purchased a facility in its city for just over $3 million, while Hickory Point Bank and Trust bought a facility in Girard for slightly more than $2 million.
Legal Hurdles Ahead
Despite progress toward finalizing the sale, Petersen Health Care IL faces legal hurdles that could delay the process. A hearing is scheduled for Wednesday in Wilmington, Delaware, to address objections from several debtors. Concerns raised include issues related to X-Caliber's consent and notification processes, as well as transparency and timing issues voiced by GMF Petersen Note LLC.
A representative from X-Caliber stated, "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."
Meanwhile, GMF Petersen Note LLC has expressed dissatisfaction with the sale process, asserting that the $118 million bid undervalues Petersen's assets. Initial estimates before bankruptcy proceedings ranged from $216 million to $305 million.
Regulatory Concerns
Adding to the complexity, the federal Department of Housing and Urban Development (HUD) has filed a motion opposing the sale due to regulatory concerns. HUD argues that the bid does not adequately cover the outstanding balances on HUD-insured mortgages.
Petersen Health Care IL entered Chapter 11 bankruptcy primarily due to financial difficulties, exacerbated by issues in the home healthcare sector, inflation pressures, staffing shortages, and the aftermath of a significant data breach in October 2023. Despite earlier hopes of raising $300 million through facility sales, the company now faces substantial debts totaling over $290 million.
Conclusion
As Petersen Health Care IL navigates the complexities of its bankruptcy proceedings and facility sales, the outcome will have significant implications for its future operations and the communities it serves. Stakeholders closely monitor developments as the company works toward a resolution that balances financial recovery with the need for high-quality care.
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