On December 5, 2018, Senior Care Centers, LLC and 120 subsidiaries (collectively, the “Debtors”) filed for chapter 11 relief in the United States Bankruptcy Court for the Northern District of Texas. The Debtors are one of the largest providers of skilled nursing services in the country, providing care on a daily basis to approximately 9,000 patients. The Debtors’ facilities include nursing, living and hospice facilities, which are located throughout Texas and Louisiana.

As of October 30, 2018, the Debtors had approximately $310.117 million in total assets and approximately $267.893 million in total liabilities. In 2017, the Debtors generated approximately $910.4203 million in revenue and reported a loss of approximately $94.254 million. This year, through through October 31, 2018, the Company generated approximately $697.056 million in revenue.

According to the CRO of the Debtors, the financial challenges faced by the Debtors are similar to those experienced by other skilled nursing facility operators and widespread within the skilled nursing industry. The Debtors faced increasing financial pressure in 2017 and 2018 cause by, among other things, declining reimbursement rates, difficulties in collecting accounts receivable, declining census and occupancy rates, increasing lease obligations, tightening terms with various trade creditors, and a significantly reduced working capital loan facility.

Prior to their filings, the Debtors hired financial advisers to explore various strategic options and attempted to negotiate a global resolution with their major constituents, including their landlords. But, these efforts were not successful.

Meanwhile, the Debtors’ finances continued to decline. Hampered by declining census and revenue and reduced liquidity due to a significant reduction to the Debtors’ availability under its working capital loan facility, the Debtors were unable to stay current with their lease obligations to certain landlords. As a result, certain landlords declared defaults on underlying leases and one key landlord publicly announced that it purportedly terminated its leases with the Debtors. Thereafter, the Debtors began experiencing additional financial pressure from trade creditors and other landlords, which became overwhelming and ultimately forced the Debtors into bankruptcy.

The Debtors apparently sought chapter 11 relief to accomplish several goals, including (a) ensuring that the patients in its facilities continue to receive high-quality medical care while the Debtors implement their restructuring strategy; (b) using the automatic stay to provide the Debtors with a “breathing spell” to permit them to pursue the orderly restructuring of business operations; (c) enabling the Debtors to transition certain of their underperforming facilities to new operators with the cooperation of certain of the Debtors’ landlords; and (d) maximizing the value of the Debtors’ assets, particularly those related to profitable facilities and subsidiaries, which efforts may include a sale pursuant to section 363(f) of the Bankruptcy Code.