Petersen Health Care attempts to sell properties
The sale of properties owned by Peoria-based Petersen Health Care will move forward after the company and one of its lenders reached a deal to allow a court-appointed receiver to maintain operations of eight Illinois facilities.
At a hearing Monday in federal bankruptcy court, attorneys for X-Caliber Funding LLC, a bridge lender of short-term financing, said that the two sides had agreed to continue with a format that had been set up in January in which Michael F. Flanagan, an attorney specializing in long-term care legal matters, would take charge of eight facilities owned by the lenders.
X-Caliber owns properties in Galesburg, Knoxville, Monmouth, El Paso, Flanagan, Kewanee and Polo.
The agreement allows X-Caliber and Flanagan to remain in operation of the facilities until July 15, while also allowing them to be included in Petersen's process of selling some of its facilities as a result of the bankruptcy filed in March.
Paige Tinkham, who represents X-Caliber for Blank Rome's Chicago office, said that the properties included believe that their value would be increased as a result of being involved with Petersen's sale process.
“The debtors believe that there will be a maximization of value to include the X-Caliber properties in this sale process,” Tinkham said. “We wanted to give them that period of time to do that.”
Tinkham said that if the properties are not sold by July 15 — around two weeks before the proposed sale deadline of July 31 — ownership of them would revert to Flanagan.
Petersen filed for Chapter 11 bankruptcy on March 20, citing liquidity issues stemming from downward trends in the home health-care field, difficulty recruiting staff, inflation and the COVID-19 pandemic recovery. In addition, a data breach in October 2023 impacted operations and led to a large number of internal records being lost.
One day after the filing, X-Caliber filed an objection stating that its eight facilities would be better off in Flanagan's continued leadership. It asked the court either dismiss the cases with prejudice, abstain, or appoint Flanagan as the Chapter 11 trustee for those facilities.
At their first appearance in court on March 22, attorney Daniel McGuire, representing Petersen, confirmed that the intent of the bankruptcy was to allow for the company to remain in operation pending a sale to one or multiple buyers.
McGuire admitted that the sale process had been slowed by the data breach and that it had taken some time to get the process back up and running.
“These homes have tremendous value as nursing homes and long-term care facilities, but not a tremendous amount of value as empty pieces of real estate,” McGuire said. “What we're looking to achieve by keeping things operational will not only benefit the residents, it is also critical to making sure that we can repay our secured and unsecured creditors in these cases.”
Court documents filed shortly after Petersen filed for Chapter 11 state that there was around $290 million in debts that had piled up from several different creditors, including X-Caliber. McGuire believes that the company could get around $300 million in value if the company's 90 facilities across the Midwest are sold.
As of May 1, Petersen said through court documents that the company had received 20 bids for its properties, including one that would include 41 facilities and another that would encompass nearly all of Petersen's properties.
The company has enlisted Walker & Dunlop Investment Sales, a company based in the Washington, D.C., suburbs specializing in brokering sales in the health care industry, to assist in the sale of the properties.