Edgemere committee says ‘no attractive path forward’ at this point

By Sarah Lizee

Olympia, Wash., Sept. 23 – Northwest Senior Housing Corp.’s motion seeking an extension of its exclusive periods to file and solicit votes on a Chapter 11 plan drew an objection from the official committee of unsecured creditors, according to documents filed with the U.S. Bankruptcy Court for the Northern District of Texas.

The group said it also plans to file a motion seeking authorization to discuss alternative and contingency plans with the debtors’ landlord, Intercity Investment Properties, Inc., without fear of additional litigation.

As previously reported, the debtors, which do business as Edgemere Dallas, filed a lawsuit against the landlord when they filed bankruptcy in April. A trial is set to take place in December.

“These bankruptcy proceedings are at a very difficult stage. There are no attractive paths forward,” the committee said in its objection.

Edgemere filed a plan on Aug. 3 that provides for the landlord litigation to be tried first and, if there is a “successful outcome” and the debtors’ ground lease is materially modified, Edgemere will reorganize, continue operating utilizing an entrance fee model, and will refund existing residents’ entrance fees from new resident deposits.

But the debtors recently announced that they are not prepared to go to trial in December and have filed a motion to reschedule it for Feb. 13. Meanwhile, the landlord has requested the trial to be rescheduled for April.

The debtors also filed their motion asking the court to extend their plan exclusivity period by 180 days through Feb. 8, which is not long enough if the trial starts on Feb. 13, the committee noted.

As a result, the debtors need the debtor-in-possession loan maturity date extended to at least March 31 from Dec. 31, and to borrow another $6 million to fund the three-month extension. But the DIP lenders have refused both requests.

“Even if the debtors could locate a new DIP lender, extending exclusivity for six months is not in the best interest of creditors and these estates,” the group said.

Bondholder plan

The committee said it has been in discussions with a group of bondholders that also intends to oppose the exclusivity extension and is working on its own plan.

The committee called some of the aspects of those discussions “appealing,” including the assumption of the ground lease, providing the ability to exit bankruptcy quickly to begin rebuilding Edgemere’s occupancy rates, as well as a proposal to transfer the landlord litigation into a litigation trust that would allow the litigation to be tried on a more realistic schedule.

However, whether the plan as a whole will be acceptable to the committee and to other creditors is not certain at the moment, the committee said.

Contingency landlord plan

The committee recently approached the landlord regarding a worst-case scenario contingency plan if no other plan is confirmed. But the landlord chose not to engage in those discussions, for fear that the debtors or bondholders will accuse it of improper conduct merely for speaking with the committee.

To alleviate these concerns, the committee said it requested that the debtors and bondholders agree to hold the landlord harmless for any such discussions. To date, neither agreed to the request.

The committee said this has led it to seek the court’s intervention, through both the exclusivity objection and the coming motion that would allow discussions with the landlord to go forward.

The Dallas-based luxury senior living community filed Chapter 11 bankruptcy on April 14 under case number 22-30659.

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