Clare Oaks creditors vote to accept amended reorganization plan

By Jim Witters

Wilmington, Del., Oct. 22 - A majority of Clare Oaks' creditors voted to accept the debtors' third amended plan of reorganization filed by Wells Fargo Bank, NA, as master trustee and Sovereign Bank, NA, according to documents filed Oct. 22 with the U.S. Bankruptcy Court for the Northern District of Illinois.

Class 1 senior DIP loan claim and class 3 other secured claims are unimpaired and deemed to accept the proposed plan, according to Patrick M. Leathem of the Garden City Group, Inc., who tabulated the ballots.

The voting results were:

• Among holders of class 2 senior secured bond claims, 99.85% in dollar amount ($81.9 million) and 98.23% of votes (277) voted to accept the plan; 0.15% in dollar amount ($125,000) and 1.77% of votes (five) voted to reject the plan;

• Among holders of class 4 unsecured claims, 100% in dollar amount ($1.15 million) and 100% in votes (eight) voted to accept the plan; and

• Among holders of class 5 membership interests, 100% in dollar amount ($4) and 100% in votes (four) voted to accept the plan.

As previously reported, Wells Fargo and letter-of-credit issuer and bondholder Sovereign Bank filed a Chapter 11 plan of reorganization on Aug. 9.

A plan confirmation hearing is scheduled for Oct. 25 and Oct. 26.

Treatment of creditors

Under the third amended plan, treatment of creditors includes:

• Administrative and priority tax claims would be paid in full in cash on the effective date;

• The holder of the secured debtor-in-possession loan claim, estimated at $6 million, would be paid in full in cash on the plan effective date;

• Holders of senior secured bond claims would receive a share of new bonds to be issued. Recovery is estimated at 45%;

• Other secured claims would be reinstated;

• Holders of general unsecured claims would receive a share of the initial distribution and any fee savings amount. Estimated recovery is zero to 2.7%; and

• Treatment of membership interests will retain their rights as members.

In addition, there is more than $34.8 million of contingent unsecured obligations owed to residents under the residency agreements. These claims are also class 4 general unsecured claims.

The plan calls for the assumption of the residency agreements, so the holders of these class 4 claims will receive a 100% recovery.

Other plan details

The plan will be funded from cash on hand of the reorganized debtor, including cash derived from business operations and, to the extent necessary, from proceeds of the DIP loan, proceeds of the sale of a portion of the series 2012 bonds and from distribution of the remainder of the series 2012 bonds, court documents state.

The plan calls for:

• An issuance of $15 million in series 2012A tax exempt bonds at 7% interest for those held by the steering committee and bank and 4.5% for those held by the landlord;

• An issuance of $40 million series 2012B bonds bearing 4% interest during the first 15 years and 6% thereafter; and

• An issuance of three tranches of series 2012C bonds: $25 million of 2012C-1 bonds at 2% interest maturing in 40 years; $5 million of 2012C-2 bonds at 2% interest through year seven, at which time the terms will become identical to the 2012B bonds; and $5 million of 2012C-3 bonds at 2% interest through year 11, at which time the terms become identical to the 2012B bonds.

The series 2012C bonds will be secured by a lien on the reorganized debtor's assets.

Bartlett, Ill.-based Clare Oaks operates a continuing-care retirement community. The company filed for bankruptcy on Dec. 5. The Chapter 11 case number is 11-48903.

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