Genesis Healthcare, a large nursing home chain based in Kennett Square, is in bankruptcy
Genesis, which has seen ownership changes for decades, said the restructuring would help it eliminate legacy liabilities from dozens of facilities it no longer operates.
Genesis HealthCare Inc., a Kennett Square company with nursing homes in 17 states, filed for bankruptcy protection late Wednesday, citing the need to restructure debt from dozens of facilities it no longer operates.
Genesis has 42 nursing homes in Pennsylvania and 11 in New Jersey. Immediate interruptions in resident care are not expected.
Founded in Chester County 40 years ago, Genesis grew dramatically through acquisitions, peaking at more than 500 nursing homes in 2016, as it cycled in and out of public ownership during the last 25 years.
Genesis said its facilities employ 27,000 people and care for 15,000 residents.
Pennsylvania, West Virginia, and New Mexico account for more than half of Genesis’ nursing homes. The chain has 17 of its 175 nursing homes in Southeastern Pennsylvania.
Genesis has always struggled to achieve financial stability. Its first bankruptcy happened in 2000 after Medicare cuts. But since its real estate was sold by a private equity owner in 2011 for $2.4 billion, the company has moved from one financial crisis to another.
The latest round of turmoil has its roots in the coronavirus pandemic. The nursing home industry was among the hardest hit sectors of healthcare. The company’s negative free cash flow totaled $286 million in 2021 and 2022.
A $50 million capital infusion in March 2021 kept Genesis out of bankruptcy during the COVID-19 crisis. The money came from an entity affiliated with Pinta Capital Partners, a New York private equity firm that specializes in nursing homes and other healthcare sectors.
“We have much to be proud of for the tremendous progress we have made as an organization over the last several years,” David Harrington, Genesis’ executive chairman, said in a news release about the bankruptcy filing in the Northern District of Texas.
“Our ongoing work has confirmed that, to maintain our momentum, we must address our legacy debt structure,” said Harrington, who in 2012 cofounded Pinta with Joel Landau, who owns nursing homes in New York.
In aggregate, the Pinta affiliate, known as ReGen, has invested roughly $100 million in Genesis and would control 93% of Genesis’ voting shares if its stake were converted to equity, according to a bankruptcy document.
» READ MORE: Here's a look at Genesis HealthCare's recent history.
Continuing to operate during bankruptcy
Genesis said it has an agreement to borrow $30 million from existing lenders to fund operations during bankruptcy. Omega Healthcare Inc., a real estate investment trust, said it was contributing $8 million to the $30 million loan. Omega is the landlord for two dozen Genesis nursing homes and is owed $121 million under term loans.
The money owed to Omega is part of $708.5 million in secured debt. In addition, Genesis has $1.57 billion in unsecured debt, according to a bankruptcy declaration by Genesis’ chief restructuring officer. The statement does not say how the debt will be restructured.
Likewise, bankruptcy documents did not provide details on a preliminary bid by entities related to ReGen to acquire Genesis out of bankruptcy. Higher bids will be sought, and the bankruptcy judge, Stacey Jernigan, will have to approve the sale.
Louis E. Robichaux IV, one of Genesis’ restructuring officers, said in a court filing that low reimbursement rates in Pennsylvania and New Jersey were especially problematic.