Senior Care Centers, LLC, the Dallas-based operator of more than 100 skilled nursing and assisted living facilities across Texas and Louisiana, filed for Chapter 11 bankruptcy on December 4, 2018, and the Senior Care Centers bankruptcy proved to be the first of three related filings that ran through 2024. The company emerged from that first case in late 2019 as a far smaller operation, filed again in 2021 after defaulting on a key landlord, and watched four subsidiaries file a liquidating bankruptcy in 2024 amid court findings of what one executive called “total mismanagement.”1Skilled Nursing News. Senior Care Centers Files Bankruptcy
The 2018 Chapter 11 Filing
At the time of filing in the U.S. Bankruptcy Court for the Northern District of Texas, Senior Care Centers served roughly 10,000 residents and employed about 11,000 people.2Skilled Nursing News. Bankruptcy Court OKs Settlement Deal Between Sabra, Senior Care Centers Management blamed “cost-prohibitive” leases, cuts in government reimbursement, and ballooning rent payments for the financial distress.3McKnight’s Long-Term Care News. Senior Care Centers Files for Bankruptcy The case landed before Chief Bankruptcy Judge Stacey G. Jernigan.4Inforuptcy. Bankruptcy Case Senior Care Centers LLC
Reported liabilities fell between $500 million and $1 billion. The identified debt in the first-day filings totaled over $120 million: roughly $45.6 million in secured asset-based lending debt, $4.3 million in additional secured debt, $35 million owed to landlords, and $36.7 million in unsecured trade debt.5American Bankruptcy Institute. Senior Care Centers Cases Illustrate Fine Line Between Complex and Small Business Cases
The Sabra Lease Dispute
Senior Care Centers had defaulted on its leases with Sabra Health Care REIT during the summer of 2018, and by filing day it owed Sabra nearly $35 million in unpaid rent and fees.6Skilled Nursing News. Sabra Sues Control Senior Care Centers Properties Amid Sale Sabra sued in late December 2018, arguing its leases on 38 properties had been terminated before the filing and that Senior Care’s continued presence was interfering with a pending property sale.
A settlement approved in March 2019 required Senior Care Centers to pay Sabra $9.5 million in two installments, $5 million by April 1 and $4.5 million by July 1, 2019. Sabra recognized $6.2 million in rent that had accrued after the bankruptcy filing.2Skilled Nursing News. Bankruptcy Court OKs Settlement Deal Between Sabra, Senior Care Centers The property sale was scaled back from 38 facilities to 28, valued at $282.5 million, and Sabra dropped its suit in exchange for Senior Care’s cooperation in transitioning the buildings to new operators.7McKnight’s Long-Term Care News. Bankruptcy Court Approves Landlord Sabras Settlement With Embattled Senior Care Centers
Reorganization and a Much Smaller Company
Judge Jernigan confirmed the Chapter 11 reorganization plan on December 13, 2019.8McKnight’s Long-Term Care News. Bankruptcy Court Approves Senior Care Centers Reorganization Plan The plan created a liquidating trust for unsecured creditors, who had asserted roughly $20 million in claims, and gave that trust 80% of the new company’s common stock plus a $10 million note. Litigation claims against the company’s former officers and directors were assigned to the trust, and Alan Halperin was appointed plan trustee.9Bloomberg Law. Senior Cares Chapter 11 Plan OKd Gives Equity to Creditors
The reorganized company kept only 22 facilities, down from more than 100. Those were spread across five landlord groups: Annaly (CHI Javelin affiliates), Fredericksburg, Hidalgo, House Cross, and TXMS, a subsidiary of LTC Properties. The rest were handed off to new operators or temporary managers by year’s end.10Skilled Nursing News. Judge Confirms Senior Care Centers Plan of Post-Bankruptcy Reorganization
The 2021 Abri Filing
A new holding company, Abri Health Services, LLC, was incorporated on November 1, 2019, as the sole owner of the reorganized Senior Care Centers.11Skilled Nursing News. Declaration in Support of Chapter 11 Petition Kevin O’Halloran, chief restructuring officer during the first bankruptcy, became CEO of both entities in March 2021.
That same March, LTC Properties sent Abri and Senior Care Centers a notice of default for failing to pay rent on the 11 skilled nursing facilities it leased from LTC. The minimum monthly obligation was $1.2 million.12Skilled Nursing News. LTC Properties to Transition 11 Abri Senior Care Centers SNFs to HMG Healthcare After Default On April 16, 2021, Abri and Senior Care Centers filed Chapter 11 Subchapter V, a streamlined process for smaller debtors. Reported debt was roughly $3.1 million, nearly all unsecured and consisting largely of unpaid rent.5American Bankruptcy Institute. Senior Care Centers Cases Illustrate Fine Line Between Complex and Small Business Cases
A separate settlement with LTC, approved in August 2021, had LTC pay $3.25 million to the bankrupt entities in exchange for cooperation in transferring the 11-facility, 1,400-bed portfolio to a new operator, HMG Healthcare.13Skilled Nursing News. LTC Settles With Abri Senior Care, Transfers 11 SNFs in Texas to HMG Portfolio HMG took over on or around October 1, 2021, under a one-year master lease with rent based on cash flow, intended to roll into a permanent lease once a stabilized rate was set. LTC also provided HMG a secured working capital loan and indemnified it for certain pre-transfer liabilities.14McKnight’s Long-Term Care News. LTC Properties Will Pay $3.25 Million to Close the Door on Senior Care Operations A second amended plan for Abri and Senior Care Centers was confirmed on October 26, 2021.15U.S. Bankruptcy Court, Northern District of Texas. Order Confirming Second Amended Subchapter V Plan, Case No. 21-30700
The 2024 Killeen Subsidiary Bankruptcy
On January 29, 2024, four subsidiaries operating under the “PM Management-Killeen” name filed for Chapter 11 Subchapter V protection. They managed three skilled nursing facilities near Killeen, Texas, one with an attached assisted living facility.16Inforuptcy. Bankruptcy Case PM Management Killeen I NC LLC The debtors reported about $6.3 million in prepetition debt, roughly $5 million of it owed to the “Hill Country Landlord” for unpaid rent, taxes, and maintenance.17U.S. Bankruptcy Court, Northern District of Texas. Memorandum Opinion, Case No. 24-30240
The court confirmed a liquidating plan on April 29, 2024. Management of the Killeen facilities transferred to Touchstone Communities, LLC. Secured lender KeyBank was paid in full, and a liquidation trust for general unsecured creditors was projected to recover between 45 and 75 percent. As of mid-2024, the trust remained active with ongoing proceedings over tax overpayment recovery from the IRS.
Mismanagement and Conflict Findings
Testifying in the 2024 case, O’Halloran acknowledged that the enterprise had been marked by “total mismanagement.” He pointed to the prior leadership team’s compensation: two co-CEOs paid $38,000 and $37,000 per month, and a chief clinical officer whose salary had jumped from roughly $200,000 to $350,000 in a short period, all while the landlord went unpaid for over a year.
The Hill Country Landlord objected that the Subchapter V filing was made primarily to benefit Abri, the non-debtor indirect parent, rather than the four debtor entities, arguing Abri used the bankruptcy to fund its own corporate overhead and shield itself from a receiver. O’Halloran served as CRO for both Abri and the debtors, and Abri owed the debtors $1.3 million. The debtors’ counsel, Gutnicki LLP, had received a $250,000 retainer paid by Marvin Rubin, identified in court filings as the “silent investor” and majority equity owner of Abri. Judge Jernigan partially sustained the landlord’s fee objection, reducing Gutnicki’s final fee award by $201,192.
A Separate HHS Settlement
Before any of the bankruptcies, Senior Care Centers faced a different federal matter. In March 2016, the company and its subsidiary Midland SCC, LLC agreed to pay $162,171 to resolve allegations by the U.S. Department of Health and Human Services Office of Inspector General that Senior Care had violated the Civil Monetary Penalties Law by employing an individual excluded from federal health care programs. The company had self-disclosed the conduct.18HHS Office of Inspector General. Senior Care Agreed to Pay $162,000 for Allegedly Violating the Civil Monetary Penalties Law
No SEC enforcement action has been brought against Senior Care Centers. The bankruptcy proceedings raised allegations of mismanagement and conflicts of interest, but those were adjudicated in bankruptcy court, not through a securities enforcement action.