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Desert Home: DHCS settlement gives unsecured creditors full recovery
By Sarah Lizee
Olympia, Wash., Feb. 28 – Borrego Community Health Foundation, which does business as Desert Home Care, is seeking approval of a settlement between the debtor, the official committee of unsecured creditors and the California Department of Health Care Services (DHCS), according to a motion filed with the U.S. Bankruptcy Court for the Southern District of California.
The debtor said the settlement resolves major issues in the case and a related adversary proceeding and paves the way for the sale of the debtor’s assets to Desert Aids Project (DAP Health) without protracted litigation, which will ensure the debtor’s patients continue to receive care without disruption.
As a result of DHCS’ agreement to subordinate part of its claim, the settlement also allows general unsecured creditors to be paid in full.
DHCS will receive an allowed general unsecured claim of about $112 million, subject to adjustments in an allowed offset amount, with the debtor and committee agreeing to apply to the court to extend the government claims bar date to Dec. 29, 2023, for DHCS to submit further proofs of claim.
DHCS will retain the allowed offset amount and will receive the sale proceeds recovery and litigation recoveries, as defined in a term sheet, which will be applied by DHCS in reduction of its allowed claim. The remaining balance will be subordinated to other general unsecured claims.
DHCS agreed to certain releases for the debtor and related parties.
The adversary proceeding and related appeal will be dismissed.
The San Diego-based provider of in-home skilled nursing services filed Chapter 11 bankruptcy on Sept. 12 under case number 22-02384.
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