Gulf Coast Health noteholders object to plan support agreement, DIP loan

By Sarah Lizee

Olympia, Wash., Nov. 8 – Gulf Coast Health Care, LLC’s proposed restructuring support agreement and its proposed $25 million debtor-in-possession financing drew objections Friday from five noteholder claimants, according to filings with the U.S. Bankruptcy Court for the District of Delaware.

The noteholder group includes REIT Solutions II, LLC, formerly known as REIT Solutions, Inc., SJB No. 2, LLC, JJT No. 1, LLC, Wet One, LLC and DLF No. 3, LLC.

As previously reported, the company is seeking court approval to enter into the RSA with its DIP lender, OHI Asset Funding (DE), LLC (Omega), New Ark Capital, LLC, certain equity sponsors and service providers.

The noteholder group said that the debtors and Omega have engineered a series of transactions that “tilt the table in favor of their preferred restructuring outcome, and severely limit the possibility of an alternative, value maximizing transaction.”

The group added that by assuming the pre-petition RSA, the debtors have committed to hand off their facilities to a new operator or operators selected by the Omega entities.

“This preordained outcome contains numerous benefits for the debtors’ equity sponsors and affiliates as well as for the Omega entities, all of whom presumably have an opportunity to continue leasing real estate, providing services, or otherwise doing business with the facilities,” the noteholders said.

“But the proposed transaction offers little, if any, hope of a meaningful recovery for unsecured creditors.”

The group said the debtors are essentially liquidating, with “only the hint of some undefined cash consideration” to be awarded to unsecured creditors at a later date, with additional benefits if they support the restructuring.

“The debtors can and should do better. None of the debtors’ filings to date reflect that any kind of market check has been conducted with respect to these operating assets,” the noteholders said.

“If the debtors are determined to proceed to confirmation on an expedited basis, they should be required to conduct a simultaneous sale process geared toward identifying value maximizing alternative transactions.”

RSA terms

The RSA intends to facilitate the continued operation of the skilled nursing or similar facilities through the debtors’ use of cash collateral, the proposed $25 million debtor-in-possession financing, and a proposed financing from New Ark, the amount of which was not disclosed in the RSA.

It also contemplates the transition of the management and operations of the Omega facilities to one or more new operators designated by Omega, and the transfer of the applicable Medicare provider agreements to a new operator.

The RSA also contemplates a Chapter 11 plan that will facilitate the wind down of the debtors’ business.

Under the plan, holders of DIP facility claims will receive the debtors’ cash and accounts receivable on the effective date, proceeds of the retained causes of action, and all other assets of the debtors after satisfaction of other claims.

Holders of administrative expense claims, priority tax claims and other priority claims will be paid in full.

Holders of New Ark claims will receive cash in the amount of their claims, less the amount of the New Ark funding.

Holders of other secured claims will receive payment in full or the collateral securing their claims.

Holders of Omega claims will receive a pro rata distribution of the unsecured claims cash amount, which was not disclosed in the RSA. The pro rata distribution owed to the holders of subordinated seller note claims will be paid to the holders of the Omega unsecured claim until the Omega claim is paid in full. In the event that the class of general unsecured creditors votes to accept the plan, then the holders of the Omega unsecured claim will contribute their pro rata distribution of the unsecured claims cash amount to the holders of general unsecured claims, each of whom will receive their pro rata share of all such amounts.

Holders of the subordinated seller note claims will receive a pro rata share of the unsecured claims cash amount.

Holders of service provider claims will receive their pro rata share of the unsecured claims cash amount, provided that if general unsecured creditors vote to accept the plan, then holders of the service providers unsecured claim will contribute their pro rata share of the unsecured claims cash amount to the holders of general unsecured claims.

Holders of general unsecured claims will receive their pro rata share of the unsecured claims amount.

Intercompany claims and existing equity interests will be canceled.

A hearing on the RSA is scheduled for Nov. 12.

Pensacola, Fla.-based Gulf Coast Health Care is a nursing home chain. The company filed Chapter 11 bankruptcy on Oct. 14 under case number 21-11336.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.