HCR ManorCare makes pre-packaged Chapter 11 filing; QCP to get stock

By Caroline Salls

Pittsburgh, March 5 – HCR ManorCare, Inc. made a pre-packaged Chapter 11 bankruptcy filing Sunday in the U.S. Bankruptcy Court for the District of Delaware.

Chief restructuring officer John R. Castellano said in a statement filed with the court that HCR ManorCare entered into a plan support agreement with Quality Care Properties, Inc. (QCP) and HCP Mezzanine Lender, LP.

Under the plan, QCP or its designee will receive 100% of the stock of the reorganized debtor in full satisfaction of its claims arising under the company’s guaranty of the lease obligations owed by non-debtor HCR III Healthcare, LLC.

Existing equityholders will receive no distributions, but holders of more than 80% of the equity of the HCR ManorCare have agreed to support the plan.

Credit facility claims will be reinstated, and any liens held by the agent will exist after the effective date as before.

General unsecured claims and severance claims will be paid in full in cash.

In addition, HCR III, QCP and the lessors under a previous master lease security agreement will enter into amendments to that agreement, and, on or before the seventh day after the plan effective date, HCR III and the lessors will terminate, release and discharge the guaranty as part of the plan sponsor agreement.

In July 2017, QCP announced that HCR III Healthcare had not paid $79.6 million in current and past due rent, triggering an event of default under the master lease between the parties and requiring immediate payment of an additional $265 million of deferred rent obligations.

QCP said the default also allowed it to terminate the master lease, appoint receivers or exercise other remedies related to any and all leased properties.

The company said in bankruptcy court filings that it may take three to six months after confirmation of the plan to obtain the regulatory approvals necessary for completion of the transaction and effectiveness of the plan.

In conjunction with the bankruptcy filing, HCR ManorCare is seeking court approval to use the cash collateral of its pre-bankruptcy secured parties to pay the expenses of its Chapter 11 cases.

According to court documents, HCR ManorCare has $1 billion to $10 billion in both assets and debt. Specifically, as of Dec. 31, the company had $4,264,000,000 in total assets and $7,118,000,000 in total liabilities, debt and financing obligations.

All listed unsecured claims were in “undetermined” amounts.

The company is being represented in the Chapter 11 proceedings by Young, Conaway, Stargatt & Taylor, LLP.

HCR ManorCare is a Toledo, Ohio-based provider of short-term, post-acute services and long-term care. The Chapter 11 case number is 18-10467.

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