DALLAS — Senior Care Centers, a Dallas-based operator of more than 100 seniors housing communities in Texas and Louisiana, has filed for Chapter 11 bankruptcy protection in U.S. bankruptcy court for the Northern District of Texas.
The company is the largest skilled nursing provider in Texas, but has struggled to pay its rent. Sabra Health Care REIT (NASDAQ: SBRA) and LTC Properties (NYSE: LTC) — two publicly traded real estate investment trusts that combined own 49 Senior Care Centers locations — both reported nonpayment of rent. Sabra has not been paid in months, and LTC did not receive the payment due for December.
Senior Care Centers also received a slew of bad press last year after not evacuating residents in advance of Hurricane Harvey, which resulted in state citations and dozens of care violations. (The Category 4 hurricane made landfall along the Texas coast in August 2017.)
The company reported “burdensome debt levels and expensive leases” as reasons for its bankruptcy filing. All facilities will remain open during the restructuring, and the company claims it will continue to pay all vendors and its 11,000 employees during the process.
“As the entire industry has seen, the leases associated with the communities have become cost-prohibitive,” says Michael Beal, chief operating officer. “This kind of action is absolutely necessary to address those costly leases while continuing to care for our patients and residents.”
"After careful analysis, we determined that the protections afforded by the Chapter 11 process are the best way to address the company's debt and costly leases while allowing us to continue to provide all the top-level care and support our residents deserve," adds Kevin O'Halloran, chief restructuring officer of Senior Care Centers.
This morning, Sabra announced that it will sell its 38 Senior Care Centers-operated facilities to undisclosed buyers for $385 million. The company said it was already seeking the sales following multiple notices of default and several lease terminations.
Sabra expects to complete the sales in early 2019.
“We determined it was in our best interest to forego a potential earn-out opportunity that may or may not be realized at some future date and instead receive more cash up front,” says Rick Matros, CEO of Sabra. “We do not expect Senior Care Centers’ bankruptcy filing to have a substantive impact on our disposition of the Senior Care Centers facilities.”
For its part, LTC reports that it had already requested a consensual termination of the lease for the 11 Senior Care Centers properties that the REIT owns. LTC is already in talks with an undisclosed Texas operator to take over the communities, should Senior Care Centers agree to terminate the agreement.
LTC reports that its master lease with Senior Care Centers requires $15.8 million in annual rent, representing 9.7 percent of the REIT’s revenue.
— Jeff Shaw