4 West Holdings LLC

3/6/18 

Texas-based licensed operator or manager of 42 skilled nursing facilities in 7 states has filed a prearranged bankruptcy. The company blames "the performance of the current group of operating Facilities has been negatively impacted by industry headwinds, regulatory actions at certain Facilities, and an inefficient geographic footprint in certain regions in the United States" for its filing.

Similar to HCR Manorcare which filed for bankruptcy earlier this week, 4 West and its affiliates emanate out of a sale leaseback transaction with a publicly-traded REIT counterparty, Omega Healthcare Investors, Inc. ($OHI). And, similarly, this business suffers from many of the same problems, 

Since 2015, the Debtors have faced significant liquidity constraints caused principally by: (a) unfavorable commercial agreements and certain liabilities assumed as part of Merger, including regulatory and personal liability claims; (b) historical losses at certain of the Debtors’ previously-operated facilities, (c) a decline in performance within the current portfolio for a variety of industry-wide developments; and (d) significant capital expenditure needs. Further, the Debtors also faced rent payment obligations to the Omega Parties under the Master Leases, which were significantly higher than their operating income could support.

Consequently, the debtor has entered into a restructuring support agreement with Omega that is predicated upon two parts: (i) a transaction whereby certain unprofitable facilities will transition to a designee of Omega and (ii) a transfer of the more successful facilities to the Plan Sponsor, SC-GA 2018 Partners LLC, which is injecting the company with $225mm of new liquidity by way of $195mm in cash and $30mm note. The Omega Parties will provide a $30mm DIP credit facility to fund the cases. 

• Jurisdiction: N.D. of Texas (Judge Hale)

• Capital Structure: $14.2mm funded RCF (Sterling National Bank), secured Master Leases (Omega), $15mm funded LOC (OHI Asset RO, LLC), $6.2mm secured note (New Ark Mezz Holdings, LLC), $1.1mm unsecured promissory note (SA Mezz Holdings, LLC)

• Company Professionals:

  • Legal: DLA Piper (US) LLP (Thomas Califano, Daniel Simon, Dienna Corrado, Andrew Zollinger, David Avraham)

  • Financial Advisor: Crowe Horwath LLP

  • Restructuring Advisor/CRO: Ankura Consulting (Louis Robichaux, Ben Jones, Chris Hebard)

  • Investment Banker: Houlihan Lokey Capital Inc. (Andrew Turnbull, Ryan Sandahl, Angus Schaller, Adam Montague)

  • Independent Director: Drivetrain Advisors LLC (John Brecker)

  • Healthcare Ombudsman: Melanie Cyganowski

    • Legal: Otterbourg P.C. (Keith Costa)

  • Claims Agent: Rust Consulting/Omni Bankruptcy (*click on company name above for free docket access)

• Other Parties in Interest:

  • DIP Lender: OHI Asset RO, LLC

    • Legal: Bryan Cave LLP (Keith M. Aurzada, Michael P. Cooley, Mark Duedall, Leah Fiorenza McNeill, David Unseth)

  • Plan Sponsor: SC-GA 2018 Partners, LLC

    • Legal: Nelligan LLP (Patrick Nelligan, James Muenker)

  • Sterling National Bank

    • Legal: King & Spalding LLP (Arthur Steinberg, Scott Davidson, Bradley Giordano, Edward Ripley)

  • Official Committee of Unsecured Creditors (Pharmerica Corporation, Healthcare Services Group, Medline Industries, Alana Healthcare, Ominicare Inc., Joerns Healthcare LLC, Regional Ambulance

    • Legal: Pepper Hamilton LLP (Francis Lawall, Donald Detweiler, Joanna Cline) & (local) Norton Rose Fulbright US LLP (Louis Strubeck Jr., Ryan Manns, Elizabeth Boydston)

    • Financial Advisor: CohnReznick LLP (Clifford Zucker)

Updated 5/18/18