Friendship Village of Schaumburg files bid procedures for assets

By Sarah Lizee

Olympia, Wash., June 14 – Evangelical Retirement Homes of Greater Chicago, Inc., which does business as Friendship Village of Schaumburg, is seeking approval of bid procedures for its assets, according to a motion filed Wednesday with the U.S. Bankruptcy Court for the Northern District of Illinois.

As background, the debtor said the Covid-19 pandemic dealt a hard blow to its business model, and in the months that followed, it did what it could to cope with what became a hostile business climate for continuing care retirement communities (CCRCs).

After months of financial losses, the debtor, which was financed by bondholders that had secured claims of more than $130 million, informed the bond trustee that it could no longer afford to pay debt service on the bonds.

The parties agreed that the best option was to find another CCRC operator to affiliate with. The debtor engaged BC Ziegler and Co. as adviser to help with the process.

Under the proposed bid procedures, the debtor would choose a stalking horse bidder by Aug. 28. The debtor is proposing to offer a 3% breakup fee and up to 1% expense reimbursement fee to the stalking horse.

The company is also considering an up to $100,000 reimbursement for potential stalking horse bidders in order to incentivize them to complete due diligence and submit fully negotiated agreements by the stalking horse deadline. The bond trustee will have consent rights regarding this reimbursement if its cash collateral is used for the payment.

Any party that is actually designated the stalking horse bidder will receive the bid protections in lieu of the diligence incentive.

The bid deadline would be 4 p.m. ET on Sept. 29, an auction would be held on Oct. 3, a sale hearing would take place on Oct. 10, and the sale would close by December 2023.

A hearing on approval of the bid procedures is scheduled for July 5.

The Schaumburg, Ill.-based retirement community filed bankruptcy on June 9 under Chapter 11 case number 23-07541.

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