By Dietrich Knauth
NEW YORK, Dec 17 (Reuters) – Genesis Healthcare is preparing for a new auction of its 175 long-term nursing homes in January, after a judge refused to approve an insider bid that would have left the same ownership group in charge after the company’s bankruptcy.
Daniel Simon, the company’s bankruptcy attorney, said at a Wednesday court hearing in Dallas that the company is working with creditor representatives and hoping to conduct a new and more open auction in mid-January.
While Genesis was “humbled” by the rejection of its initial sale proposal, the new auction must proceed quickly if the company’s nursing homes are going to survive under new ownership, Simon said in court.
“We have one shot to get this right,” Simon told U.S. Bankruptcy Judge Stacey Jernigan.
Genesis, which operates 175 skilled nursing facilities and assisted living facilities in 18 U.S. states, filed for bankruptcy on July 9 with over $2.3 billion in debt. The company said it was struggling because of high debt racked up during a period of expansion and acquisition, difficulty in retaining nursing staff, and a growing number of lawsuits over the quality of healthcare at its facilities.
Genesis faces more than 200 lawsuits alleging malpractice, wrongful death or other injury. At the time of its bankruptcy, the company said it owed $259 million to plaintiffs, including settlements that the company had agreed to pay, while plaintiffs have argued the company owes far more.
Jernigan said last week that she would not approve Genesis’ proposal to sell its assets to a shell company affiliated with Genesis’ current private equity owners, Pima Capital Partners and ReGen Healthcare.
The proposed deal would have allowed the same ownership group to maintain control of the company’s nursing homes while using bankruptcy to slash debts and medical malpractice claims.
Several creditors, including people who had sued Genesis, had argued that the company’s previous auction was “skewed” to favor the insider bid.
Jernigan said she wanted junior creditors’ representatives to “take point” on the new auction, and she said the sale should not release legal claims against company insiders. Andrew Turnbull, an investment banker for Genesis’ junior creditors, said at Wednesday’s hearing that he was working with Genesis to reach agreement on the procedures for the new auction, and he said that he heard from four or five additional bidders who could participate in the new auction.
