A not-for-profit senior living operator with three communities in the Dallas area has filed for Chapter 11 bankruptcy after challenges exacerbated by the Covid-19 pandemic, with a stalking horse bidder already lined up for a bankruptcy sale.
The operator, Christian Care Communities & Services (CCC&S), has three communities in the Dallas/Fort Worth area totaling 760 units. They include communities in Allen, Fort Worth and Mesquite Texas. The organization also owns unimproved property adjacent to its Mesquite and Fort Worth communities.
The organization’s estimated assets and liabilities include between about $50 million and $100 million, with outstanding municipal bonds totaling about $50 million, according to its bankruptcy court filing.
Prior to the filing, the company negotiated a purchase agreement with North Texas Benevolent Holdings, which will serve as a stalking horse bid in a proposed bankruptcy sale with an agreed price of $44,250,000. A stalking horse sale is an initial bid on assets of a bankrupt entity that effectively establishes a low-end bidding floor so that bidders can’t underbid the purchase price.
CCC&S expects the sale of properties to have been completed in August or September.
North Texas Benevolent Holdings plans to lease the communities to affiliates of Boncrest Resource Group, which will honor all resident contracts, deposits and entrance fees, according to a press release on the bankruptcy filing.
“We are grateful to have found an operator who shares our long-term commitment and values,” Sabrina Porter, President and CEO of Christian Care Communities & Services, said in a press release. “This sale, when approved by the bankruptcy court, will keep our communities stable and sustainable for years to come.”
Though the pandemic “exacerbated” the company’s financial difficulties, those challenges began in 2018. The company had planned several CapEx projects that were put on hold in 2020 due to lack of funding, according to the bankruptcy filing.
The pandemic led to a “significant decline” in occupancy at the company’s three communities, while at the same time “market forces limited the ability to raise revenues from resident rent to match these increased liabilities,” according to the filing.
In April 2021, credit ratings agency Fitch Ratings downgraded the organization to a D rating after it failed to pay the principal payments on its bonds that were due the previous month.
“Decreases in fundraising contributions also meant donations were not sufficient to defray the shortfall,” the filing continued. “Based on extensive financial analysis and other due diligence, the debtors have determined it is in the best interest of their estates, their residents, and the future of their communities to sell substantially all of their assets.”
Christian Care Centers is not the only senior living organization that has filed for bankruptcy as a result of Covid-19 challenges. In April, a court OKed a Chapter 11 bankruptcy plan for American Eagle Delaware Holding Company and its subsidiary Eagle Senior Living.
Senior living communities represented the largest portion of delinquencies reported by municipal bond issuers in the first quarter of 2022, showing it is “was the most poorly positioned sector to withstand the pandemic,” according to an April 15 report by Moody’s Investors Service.
“This is both because of the vulnerability that senior living has by nature to a health emergency that disproportionately affects the elderly, and because the inherent financial weakness of many borrowers left them with little margin to survive a disaster of any kind,” the report read.