A Texas-based nonprofit senior living provider has filed for Chapter 11 bankruptcy to handle funded debt obligations of about $160 million.
Sears Methodist Retirement System (SMRS) filed for bankruptcy protection June 10 spanning all of its locations in eight cities throughout Texas; of 11 properties in total, eight are senior living communities and three are Texas State Veteran’s Homes. Senior Dimensions, Inc., an affiliate of SMRS, has contracts with the Texas Veterans Land Board to operate the veterans’ homes. The company ranked No. 61 in the LeadingAge Ziegler 100 for 2013, which ranks the largest non-profit senior living providers.
SMRS entered the recent filing in U.S. Bankruptcy Court for the northern district of Texas, Dallas Division.
The company refinanced its debt last year, but says in part as a result of the economic downturn and inability of seniors to sell their homes, it is no longer able to meet its obligations. Projected occupancy among its sites was not achieved, which contributed to the need for financial restructuring, SMRS spokeswoman Nancy Shellhorse told SHN in an email.
In an effort to maintain its commitment to residents across its communities, SMRS requested and won court approval to access funds toward avoiding disruption to its more than 1,510 residents and nearly 1,500 employees.
A Dallas Division judge granted SMRS permission June 12 to borrow $600,000 from existing bondholders. The money will be used for payroll purposes, Shellhorse said.
The bankruptcy filing is part of SMRS’ financial restructuring plans and will not impact day-to-day operations, SMRS said in a released statement.
“Making this decision will allow us to reduce our debt while continuing normal operations at our campuses, thereby ensuring that a high quality of care continues,” SMRS says. “Our system’s business model is sound and our operations strong.”
The decision to file for Chapter 11 bankruptcy was made “after restructuring negotiations between SMRS and certain holders of a significant portion of the System’s debt were unsuccessful,” Shellhorse said.
As of January 2014, on a book value basis, SMRS had approximately $34.1 million in assets and $103.8 million in liabilities, the filing shows.
SMRS’ main assets consist of about $8.6 million in cash and cash equivalents, the vast majority of which includes trustee-held funds; about $63,500 in accounts receivable; and about $1.9 million in property and equipment.
SMRS completed a refinancing plan in May of last year, the filing shows, during which it paid off some existing bank debt. Following the refinancing plan, the company maintained $99.1 million of overall debt. As part of the refinancing plan, about $22.5 million of new money bonds were issued to help replace the $17.8 million of bank loans previously outstanding.
In 2013, the debtors collectively received about $14.8 million in Medicare payments and about $5.5 million in Medicaid payments, according to the filing.
The company stressed that communities will run business as usual despite the bankruptcy filing.
“We look forward to many years of service in the years ahead,” SMRS says.
Written by Cassandra Dowell