April 6, 2000
Nursing Homes Filing for Bankruptcy at Increasing Pace
More than 1,600 of the nation's 17,000 nursing homes have filed for
bankruptcy since last fall, many of them in the West, as they struggle
with federal funding cuts, a lack of local or state money, increased
insurance costs and tougher quality-care standards, the Associated Press
reported. For some, the filings have resulted from bad business
decisions, heavy debt loads and claims of defrauding government health
care programs. Most of the nursing homes in bankruptcy proceedings have
managed to remain open while they try to reorganize, despite plummeting
stock prices for corporate properties; however, many other homes have
closed or laid off employees. In Nevada and New Mexico, nearly half the
homes owned by big chains and affiliated with the American Health Care
Association filed for bankruptcy protection—the highest rates in
the nation. 'The system is crashing around us,' said Michael Clark,
executive director of the Nevada Health Care Association. 'With all the
bankruptcies we're facing, it's a disaster right now.' Added Linda
Sechovec, Clark's New Mexico counterpart, 'Long-term care is something
nobody wants to deal with until they have to.' Without funding
improvements, 'we are headed for a real catastrophe. If the baby-boom
population hits the age that they need this care and we still have a
reduced pool of workers, the system will fall under its own weight.'
Roughly 1.2 million elderly and disabled people live in U.S. nursing
homes. A national effort is underway to restore federal Medicare funding
that was slashed for a wide range of health care programs when Congress
approved the Balanced Budget Act of 1997. Medicare funding cuts in 1997
could reportedly total $15 billion over several years, even though
Congress last year restored $2.7 billion for patients needing skilled
nursing care. In a report released late last year, the General
Accounting Office said that Medicare patients are getting the care they
need in nursing homes, although the federal changes are making it
tougher for some to get into the facilities they prefer. In addition,
the federal Health Care Financing Administration, which oversees the
Medicare and Medicaid programs, insists that residents of nursing homes
that remain open need not worry about their safety. Sen. Charles
Grassley (R-Iowa), chairman of the Senate Special Committee on Aging,
questioned whether poor management played a role in the nursing home
industry's problems, and has asked for a GAO study of the industry's
finances. 'The taxpayers spend $39 billion a year on the nation's
nursing homes. Is that enough to buy good care? It seems that it should
be. It's a lot of money. But we don't know enough about how nursing
homes spend that money to know for sure.' Industry analysts have said
that some publicly traded nursing home companies are to blame for their
problems because they borrowed to fund expansion, but didn't figure on
government cost cuts and other factors that reduced cash flow. 'It's a
very serious situation for nursing home residents,' said Elma Holder,
founder of the consumer-oriented National Citizens' Coalition for
Nursing Home Reform. 'It's just astonishing that the government can't
figure this out and make the corporations pay for what they've
done—the fraud they've committed in taking advantage of the
system. The industry has gotten away with so much.'
Vista Eyecare Files for Bankruptcy
The nation's No. 3 optical retailer, Vista Eyecare Inc.,
Lawrenceville, Ga., said on Wednesday it had filed for chapter 11 in the
U.S. Bankruptcy Court in the Northern District of Georgia, according to
Reuters. The bankruptcy filing 'should have little or no impact on our
customers, our independent optometrists, or our employees,' said Chief
Executive Officer James Krause. 'Our problems are clearly
defined—too much high-cost debt and too many under-performing
retail centers acquired in 1998. We have spent the past several weeks
attempting to come up with a proposal that would address these problems
outside of a court proceeding.' Vista said it expects to receive
debtor-in-possession financing, subject to court approval.
Court Confirms Willcox & Gibbs's Reorganization Plan
Willcox & Gibbs Inc., Carteret, N.J., announced yesterday that
its chapter 11 reorganization plan was confirmed on Monday by the U.S.
Bankruptcy Court for the District of Delaware, according to a newswire
report. Willcox & Gibbs, a distributor of replacement parts,
supplies and ancillary equipment to manufacturers of apparel and other
sewn products, expects the plan to take effect later this month in
connection with the closing under the company's new credit agreement
with Banc of America Commercial Finance Corp. Willcox & Gibbs is
currently operating as a debtor-in-possession.
Judge Dismisses CRIIMI MAE Class Action Complaint
The U.S. District Court for the District of Maryland Southern
Division dismissed the consolidated class action complaint filed against
certain officers and directors of CRIIMI MAE Inc. last Thursday,
granting the defendants' motion to dismiss the complaint, according to a
newswire report. The district court found that the plaintiffs in the
class action, who purchased securities of CRIIMI MAE between Feb. 20,
1998 and Oct. 5, 1998, did not substantiate their claims that specific
CRIIMI MAE officers and directors violated certain federal securities
laws. CRIIMI MAE Inc., which acquired and securitized commercial
mortgages and mortgage-related assets, and two affiliates filed chapter
11 on Oct. 5, 1998, suspending its loan origination and securitization
business. The ruling does not dispose of other pending lawsuits and/or
claims in bankruptcy that may affect the company. On Friday, CRIIMI MAE
and two of its affiliates filed their second amended joint
reorganization plan and disclosure statement with the U.S. Bankruptcy
Court for the District of Maryland in Greenbelt; the court has scheduled
a hearing for April 25 and 26 on the approval of the disclosure
statement.
Aureal Inc. Files for Chapter 11
Aureal Inc., Fremont, Calif., filed for chapter 11 with the U.S.
Bankruptcy Court in Oakland, Calif., according to a Dow Jones newswire
report. Aureal, which provides audio products for the computer and
entertainment markets, reported a 1999 loss of $26.9 million, or $3.67 a
share, on sales of $40.3 million.
Gencor Industries Denies Necessity of Involuntary Chapter 11
Gencor Industries Inc., Orlando, Fla., reported yesterday that a group
of six lenders broke away from its bank group and filed an involuntary
chapter 11 petition, asserting a total of about $52 million in claims
against Gencor, according to a Dow Jones newswire report. The company,
which makes and sells industrial process equipment, denies that it is in
bankruptcy, saying that the move is 'unwarranted' and that it is a
viable and profitable company that shouldn't be in chapter 11. In
addition, the company said that it is on good terms with its vendors and
customers and intends to vigorously oppose the petition through all
available legal means with its own claims and charges that it intends to
bring forth.
Purina Mills Reorganization Plan Confirmed by Court
St. Louis-based Purina Mills, Inc., the nation's largest animal
nutrition company, announced yesterday that the U.S. Bankruptcy Court
for the District of Delaware has confirmed the company's second amended
joint reorganization plan, paving the way for the company to emerge from
chapter 11, according to a newswire report. The plan was approved by
more than 95 percent of the company's creditors that voted on it and
provides the blueprint for the reorganization of Purina Mills and 10 of
its affiliates, which filed voluntary chapter 11 petitions on Oct. 28.
While its chapter 11 emergence is contingent on the completion of
certain corporate restructuring matters, including certain securities
requirements that must be accomplished in order to issue new publicly
traded common stock to unsecured creditors under the terms of the plan,
Purina Mills said it anticipates emerging from chapter 11 before the end
of the second quarter. The plan provides that nearly all of the new
common stock of reorganized Purina initially will be distributed to the
company's pre-petition general unsecured creditors. 'We have been the
recognized leader in our industry for 106 years and we intend for our
industry leadership to continue,' said Purina's Chief Executive Officer
Brad Kerbs. 'As long as there are animals, there will be an important
animal nutrition business. We are nearing the end of the restructuring
and are looking forward to profitably growing our company as we continue
to supply America's animal owners and production systems with the
nutrition products, knowledge and services that exceed our customers'
expectations.'
Vencor's Exclusive Periods Extended to May 16, July 17
The U.S. Bankruptcy Court in Wilmington, Del., has granted Vencor Inc.'s
(VCRIQ) request for a two-month extension of the company's exclusive
periods to file a reorganization plan and solicit plan acceptances. U.S.
Bankruptcy Judge Mary Walrath's order extends the plan filing period to
May 16 and the vote solicitation period to July 17. This is the second
extension the court has granted to the long-term health care provider.
On Jan. 27, Vencor also obtained a two-month extension.
Courtesy
of
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