McKnights Senior Living reported in a recent article that a Wilmington, DE-based senior living company has initiated a voluntary Chapter 11 process in a move the company hopes will strengthen its financial structure and provide flexibility to make necessary capital improvements. Finance and restructuring partner and co-leader of the senior living and care team George Mesires spoke with the publication and provided insight on pre-negotiated bankruptcy cases in the industry.
“Although never ideal, in limited instances, a bankruptcy of a senior living and care community may be ultimately beneficial for the community, its residents and constituents,” Mesires told the publication. “A pre-negotiated bankruptcy case, where a broad group of constituents carefully negotiate the terms of a restructuring before a filing, are typically much smoother than a free-fall Chapter 11, which can significantly destroy value and cause uncertainty among the constituents.”
Mesires also noted that, in a pre-negotiated bankruptcy case, creditors often voluntarily agree to write off debt to ease the burden on the community and to provide liquidity for working capital or capital expenditure needs.
“Pre-negotiated cases can signal to the market that a bankruptcy case is widely supported and will be minimally disruptive to the community and its most important constituency, the residents,” he said.