Henry Ford Village committee has concerns about stalking horse deal

By Sarah Lizee

Olympia, Wash., April 9 – Henry Ford Village, Inc.’s official committee of unsecured creditors says it has concerns about MED Healthcare Partners serving as stalking horse bidder for the company’s assets, according to a statement filed Friday with the U.S. Bankruptcy Court for the Eastern District of Michigan.

The group claims the stalking horse asset purchase agreement does not honor the debtor’s commitment to its current and former residents to refund significant entrance fee payments made by residents as condition of living at Henry Ford Village under the terms of their residency agreements.

“These entrance fee refunds often constitute a resident’s life savings and were entrusted to Henry Ford Village based on the debtor’s promise to refund these substantial payments to the resident or their family upon their departure from Henry Ford Village,” the committee said.

“Because these entrance fee payments are made by a uniquely vulnerable population of elderly residents, entrance fee refunds are almost always honored and protected, even in bankruptcy proceedings.”

The committee also asserts that the stalking horse asset purchase agreement appears engineered to only pay secured bondholders and administrative expenses in full, including millions in professional fees incurred during this bankruptcy case, but only provide a de minimis distribution to residents and all other unsecured creditors.

“It is well established that Chapter 11 may not be used to force a sale of assets that only benefits the secured lender,” the group said.

In addition, the committee said the agreement improperly seeks to treat similarly situated unsecured creditors differently by proposing a greater recovery of entrance fee refunds to current residents of Henry Ford Village that sign a new rental agreement with the stalking horse bidder than other current and former residents.

Specifically, current residents that sign a new rental agreement will receive as much as 60% of their entrance fee refund claim while all other current and former residents can only expect to receive a de minimis recovery.

“Such disparate treatment violates the bedrock requirement of the Bankruptcy Code that creditors of equal priority must be treated equally,” the committee said.

Lastly, the committee said the agreement seeks to reject all current residency agreements and replace them with monthly rental agreements, thereby converting Henry Ford Village from an entrance fee community to a rental community.

While the agreement requires the stalking horse bidder to maintain the same reduced monthly fees that exist under the current residency agreements for three years, it eliminates the obligation to repay entrance fee refunds when the resident departs Henry Ford Village and seeks to discharge millions of entrance fee refund obligations through the bankruptcy process, the committee said.

Henry Ford Village is a senior living community based in Dearborn, Mich. The company filed Chapter 11 bankruptcy on Oct. 28, 2020 under case number 20-51066.

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