Edgemere and committee, DIP lender UMB Bank file competing plans

By Sarah Lizee

Olympia, Wash., Nov. 3 – Northwest Senior Housing Corp., which does business as Edgemere Dallas, and its official committee of unsecured creditors filed a Chapter 11 plan on Wednesday with the U.S. Bankruptcy Court for the Northern District of Texas.

The same day, bond trustee and debtor-in-possession lender UMB Bank NA filed a separate Chapter 11 plan.

Debtor, committee plan

The debtor and committee plan provides for sponsor support from sole member Lifespace Communities, Inc., consisting of $20 million in cash on the effective date.

It also provides for additional liquidity support in the form of a liquidity support agreement in the unfunded amount of $20 million and a debt service support agreement in the annual unfunded amount of $9 million for seven years after the effective date.

The plan also provides about $17.4 million in waived and deferred overhead allocation charges.

New 2023 bonds will be issued, providing about $88.9 million in new capital to the reorganized debtor.

Assets would be transferred, including avoidance actions and the landlord litigation, into a litigation trust on the effective date or as soon as possible thereafter for the benefit of holders of bond deficiency, former resident, current resident and general unsecured claims.

The plan will eliminate the outstanding debt on account of the debtor’s original bonds and increase liquidity for working capital and capital expenditure needs, while ensuring that Edgemere can continue to operate under the plan, allowed administrative claims, the DIP facility claims, allowed priority tax claims, allowed other priority claims, secured bond claims and allowed other secured claims will be paid or satisfied in full.

Holders of bond deficiency claims are impaired and will receive cash in an amount equal to 20% of the claims, a new note in an amount equal to 20% of the claims, payable in five years, and a pro rata interest in the litigation trust.

Holders of former resident claims are impaired and will receive cash equal to 20% of the amount of entrance fees paid to the debtor, cash five years after the effective date equal to 20% of the entrance fees, and a pro rata interest in the litigation trust.

Holders of current resident claims are impaired and will receive a replacement residency agreement with a lifecare benefit, cash equal to 20% of the entrance fees, cash five years after the effective date equal to 20% of the entrance fees, and a pro rata interest in the litigation trust.

Intercompany claimholders will receive no distribution.

Holders of general unsecured claims are impaired and will receive cash equal to 20% of their claims, cash five years from the effective date equal to 20% of their claims, and a pro rata interest in the litigation trust.

Lifespace’s interests will be reinstated.

UMB Bank plan

UMB’s plan provides for a sale transaction under which all of the debtors’ assets will be sold to a purchaser who will continue running the community as a going concern.

A stalking horse bidder, Bay 9 Holdings LLC, has been selected by UMB. The stalking horse bidder has offered to purchase the community for $48.5 million. The remaining assets will be transferred to a litigation trust for the benefit of creditors.

Under bid procedures filed with UMB’s plan, bids would be due by 5 p.m. ET on Dec. 27, an auction would be held on Dec. 28, and a sale hearing would take place on Jan. 10.

A litigation trustee will prosecute and liquidate the liquidation trust assets, with the proceeds distributed on a pro rata basis to holders of general unsecured claims, including residents.

The asset purchase agreement contemplates the conversion of the community to a rental model, rather than an entrance fee model.

Under the plan, other priority claims and other secured claims are unimpaired.

Holders of bond claims impaired. On the effective date, the net proceeds after payment of allowed administrative claims, priority tax claims, professional claims, DIP facility claims, the diminution claim and U.S. trustee fees, will be paid to the trustee, which funds will be disbursed to holders of the bond claims.

Assuming no competing qualified bids are received and the sale transaction with the stalking horse closes, holders of bond claims are estimated to receive distributions ranging from 30.1% to 31.4% of their bond claims. The bond deficiency claim will be treated on a pro rata basis with holders of allowed general unsecured claims.

General unsecured claims are impaired. Holders will receive distributions ranging from 0% to 50% of their claims, depending on the outcome of the landlord litigation, retained causes of action and the liquidation of other trust assets. Residents will also maintain any direct individual claims against Lifespace, which recoveries will reduce the amount of allowed general unsecured claims.

Lifespace’s interests will be canceled under this plan.

A hearing to consider each of the plans is scheduled for Jan. 10.

The Dallas-based luxury senior living community filed Chapter 11 bankruptcy on April 14, 2022 under case number 22-30659.

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