Care centers group files for Chapter 11

Operator with 13 sites in the area blames fewer patients, rising rents

A large Dallas-based operator of senior care, assisted living and hospice facilities in Texas — including 13 in the San Antonio area — has filed for Chapter 11 bankruptcy reorganization.

Senior Care Centers attributed its financial troubles to declining reimbursement rates, shrinking occupancies, rising rents and other challenges facing the industry. Each of its 120 affiliated companies also filed for bankruptcy protection.

The bankruptcies will provide a “breathing spell” to permit an “orderly restructuring of business operations,” transfer underperforming facilities to new operators and maximize the value of its assets, which could include a possible sale, bankruptcy court documents show.

Senior Care Centers operates 97 senior living facilities, nine assisted living facilities and six hospice facilities in Texas and Louisiana. It has about 13,000 beds and 11,300 employees.

In a statement last week, the company said the bankruptcy is part of a plan to strengthen its “financial footing” while it continues to provide care and support to its roughly 10,000 patients.

“This plan allows us to address certain financial issues while continuing to provide the critical care and support on which our residents rely while we work to transition certain communities to new operators,” Senior Care Chief Operating Officer Michael Beal said in the statement. Each facility is expected to continue to run without interruption.

Senior Care hasn’t made any determination yet regarding which facilities it will seek to transfer to new operators, spokesman Tom Becker said.

The company lost about $94 million on $910.4 million in revenue last year. It generated $697 million in revenue in the first 10 months of this year but didn’t report its bottom-line results.

In a court filing, Senior Care Chief Restructuring Officer Kevin O’Halloran said its financial difficulties caused it to fall behind on rent owed to certain landlords.

Sabra Health Care REIT Inc., landlord on 38 Senior Care locations, sent a notice of default to Senior Care on Aug. 9. Two weeks later, Sabra sent lease termination notices.

The termination notices were subsequently withdrawn, O’Halloran said, though he added that Sabra has said they were not withdrawn. Sabra, a real estate investment trust based in Irvine, Calif., is owed almost $32 million in unpaid rent.

Sabra last week announced that it is selling the 38 locations — 36 skilled nursing facilities and

two senior housing communities — for $385 million. Sabra CEO Rick Matros said in a phone interview that the buyer is New Yorkbased BlueMountain Capital Management. The bankruptcies are not expected to affect the sale, which is slated to close early next year.

Bexar Appraisal District records show that Sabra owns the San Antonio buildings where Senior Care operates Mystic Park Nursing & Rehab Center and Mesa Vista Inn Health Center.

Sabra also owns the building occupied by Bandera Nursing & Rehab Center.

Irvine-based Granite Investment Group, Senior Care’s majority owner and landlord of 34 facilities, likewise sent notices of default and lease terminations for failure to pay rent, O’Halloran said in a court filing.

Locally, Granite is the landlord of five Senior Care locations, according to the Appraisal District’s website. They are SCC at Hunters Pond Rehabilitation and Healthcare Center, SCC at Pecan Valley, SCC at Westover Hills, Senior Care of Windcrest and Senior Care of Wurzbach.

A call to Granite was not immediately returned.

With financial pressures mounting in June, Senior Care began exploring “strategic alternatives,” O’Halloran said. Those included talks with key landlords to “restructure, reduce or defer ongoing rent payments.” It also explored a sale of some of its assets and refinancing a debt facility.

The effort to negotiate a “global resolution to its financial challenges outside of (bankruptcy) court was not successful,” O’Halloran said.

Senior Care is in ongoing negotiations with an unnamed buyer, he added. The company also intends Bandera: Bandera Nursing & Rehab Center, 222 FM 1077

Fredericksburg: Windcrest Nursing and Rehab Center 210 W. Windcrest St.

New Braunfels: Sundance Inn Health Center 2034 Sundance Parkway to hire an investment banker or broker to explore selling the portion of the company that will not be “transitioned” to landlords.

The company had about $310 million in assets and about $267 million in liabilities as of Oct. 30. Its market value is likely less than its book value, O’Halloran said.