A Senior Healthcare Company Now Files An Unexpected Bankruptcy

June 3, 2024

A senior healthcare company now files an unexpected bankruptcy, citing current economic and industry challenges holding it back.

“LaVie Care Centers, LLC, an operator of 43 licensed skilled nursing facilities in five states, has taken steps to implement a financial restructuring designed to improve its capital structure and position the company for long-term success,” the company said in a news release.

The need for senior-living facilities is expected to grow as more Americans turn 65 and older.

“More than 3,000 new nursing homes could need to be built to keep up with demand as the older population expands,” according to Senior Living.

However, that number will be challenging to meet given the industry’s difficulties, reports TheStreet.

“Building new nursing facilities is easier said than done, partly because nursing homes are notoriously challenging to staff,” the website reported.

“This problem has gotten worse due to the current economic situation.

According to a survey by the American Health Care Association and National Center for Assisted Living, 87% of nursing homes deal with moderate to high staffing shortages, and 61% limit new admissions due to workforce issues.”

The moves the company has made and plans to make will not affect its operations.

“This process not only ensures that the company can continue operating its existing portfolio in a seamless manner, but it also addresses its legacy liabilities associated with previously divested operations,” LaVie Care Centers added.

“To facilitate this process efficiently and with minimal disruption to ongoing operations, the company has filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Georgia.”

The company has tried to assure its customers that it will survive the Chapter 11 bankruptcy process and will continue operating normally during it.

“LaVie Care Centers and the current facilities in its portfolio will continue operations as normal, ensuring that all necessary care and treatment will be provided to its residents,” the company said.

To fund its operations during the Chapter 11 bankruptcy process, the company secured $20 million of debtor-in-possession financing from key stakeholders, including affiliates of Omega Healthcare Investors, the company’s largest landlord and secured lender.

“Following court approval, this new DIP financing, combined with cash on hand and cash flow generated from ongoing operations, will support the business to satisfy its ongoing obligations, and enable the company to remain focused on delivering quality care during the court-supervised process,” LaVie added.

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Also Read: Another Mall Clothing Retailer Now At High Risk of Bankruptcy

Other Economy News Today

An essential company now files a surprising bankruptcy after miscalculating demand for its inventory after the Covid-19 pandemic.

Supply Source Enterprises, a leading provider of branded and private label cleaning products and personal protective equipment, on May 21 filed for Chapter 11 protection to seek a sale of its assets.

Supply Source brands include The Safety Zone and Impact Products.

The Guilford, Connecticut debtor listed $50 million to $100 million in assets in its petition and $180 million in funded debt, which includes $80 million owed on a term loan credit facility, $60 million owed on an asset-based loan, and about $40 million in unsecured debt.

Before the Covid-19 pandemic, which generated huge demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with stable single-digit growth, according to a declaration from the debtor’s Chief Restructuring Officer Thomas Studebaker.

Once the pandemic hit in 2020, the debtor had substantial growth due to high demand for safety, hygiene and sanitation products

The debtor reported adjusted Ebitda of $93 million in 2020 which was nearly a 300% increase over the previous year.

However, the company’s financial performance deteriorated in subsequent years.

Based on the unprecedented demand in 2020, the company commissioned an industry study in early 2021 that concluded that the Covid-19 pandemic would fundamentally change the cleaning supplies and protective equipment industry and market for its products.

The study also estimated that the company’s Covid-related growth would likely be sustained through 2024.

In contemplation of continued customer demand at elevated prices, based on the study’s data, the debtor increased purchases of inventory even though the costs were higher due to supply chain constraints during the pandemic.

Despite the study’s assurance that growth would be sustained for years, the pandemic’s positive effect on the market faded by the end of 2021 and demand for PPE decreased to normal rates, reports TheStreet.

The reduction in demand led to large amounts of excess inventory that the company could not sell in the same quantities and prices.

The excess inventory forced the debtor to secure additional storage space, which increased storage costs.

These factors tightened the company’s liquidity and led to a decline in annual revenue in 2023 by 26% from 2022, resulting in a negative 2023 Ebitda of $13 million.

The debtor’s liquidity issues led to it being overdrawn on its asset-based loan facility by $30 million.

The ABL lender in February 2024 swept the debtor’s bank accounts, further impacting the company’s financial distress.

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Also Read: This Massive Mall Retailer Is Now Closing In California

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