U.S. bankruptcy judge Henry Van Eck has approved a plan for the $40 million sale of Cedar Haven, the nursing home sold by Lebanon County in 2014, which is now entangled in its second bankruptcy since its switch to private ownership.
The sale, not expected to completed for about 60 days, was approved by Van Eck following a May 19 hearing in Harrisburg.
Since going private, a series of transactions has led to split ownership between Cedar Haven’s building and grounds, 590 S. 5th Avenue LLC, and the separate company that operates the home and cares for residents on a day-to-day basis, Cedar Haven Acquisition LLC.
If the sale approved on May 19 is completed, Cedar Haven will once again be owned by a single entity known as Cedar Haven Healthcare Center (CHHC), the company currently operating Cedar Haven on behalf of Cedar Haven Acquisition, and an affiliate of both 590 S. 5th Avenue and MDA Capital Group, a private equity firm concentrating on the nursing home industry.
The current bankruptcy has been filed by the operating company , not the company owning the real estate. As a result, Cedar Haven’s buildings and land, which all agree represent the bulk of the $40 million sale price, are not available to pay the operating company’s creditors.
A May 1 “bundled auction” held by a court-appointed bankruptcy trustee yielded a combined high bid for all real estate and non-real estate assets of $40.375 million.
Contrary to Van Eck’s earlier order, the trustee did not separately auction the non-real estate assets of the bankrupt operating company. Instead, the parties told the judge at a May 6 hearing that they would hold back $2 million from sale proceeds for the benefit of creditors.
Van Eck said on May 6 that he wouldn’t approve a sale on that basis and told the parties to come back on May 19 with a new auction result or some other market-based valuation of the non-real estate assets, including any value of the operating company as a “going concern” that could meet its financial obligations.
At the May 19 hearing, the parties told Van Eck that they had agreed to make $5.25 million from the sale proceeds available, up from the original “carveout” of $2 million, for creditors that include the commonwealth, and for the trustee’s costs of overseeing the bankruptcy proceedings.
That number, according to an attorney for the bankrupt operating company, was market-based, arrived at with input from experts who had marketed Cedar Haven before the auction, the fact that the total sale price exceeds the original pre-auction estimate of $27.9 million, and that two independent bidders had run the price up to $40.375 million after 54 rounds of bidding.
Van Eck was satisfied that the agreement is in the best interests of the bankruptcy creditors, and creditors who were not happy with the May 6 proposal told him they were withdrawing their objections.
The sale cannot close until the facility’s operating license transfer is approved by the commonwealth and details of the real estate transfer are ironed out.
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