KENNETT SQUARE >> Genesis HealthCare announced it has reached agreements with several landord and credit parties that will allow it to reduce fixed charges and improve cash flow.
The announcement came Wednesday as the company reported third quarter results and was reviewed further Thursday morning during a conference call between the nursing care provider’s CEO and investors.
The latest financial restructuring is “a huge, huge step for us bridging to the recovery and moving to the next cycle of this industry,” Genesis HealthCare chief executive George V. Hager Jr. told investors.
Under the plan, two companies that Genesis leases properties from — Sabra Health Care REIT Inc. and Welltower Inc. — will sell certain properties to new owners who have agreed to lease them to Genesis at a lower rate.
If completed, the restructuring plans, which include debt restructuring and a pause in cash payments on certain debt, are expected to reduce the company’s current cash fixed charges between $80 million and $100 million annually.
Genesis said it believes the transactions could occur during the first half of 2018.
“We are very appreciative of the constructive and collaborative support of our key credit partners,” Hager said. “We look forward to executing on the restructuring plans, which upon completion, we believe will result in a significantly strengthened capital structure for the company, providing adequate liquidity and free cash flow to allow continued investment in our people and our clinical programs.”
The company on Thursday scrambled to tamp down reports that it could have to file for bankruptcy.
“No, Genesis is not contemplating filing for bankruptcy,” said Jeanne Moore, vice president of public relations and communications for Genesis HealthCare. “This is an extremely positive development for the company.”
The restructuring comes after another difficult quarter for the company.
US GAAP revenue in the third quarter of 2017 was $1.32 billion compared to $1.42 billion in the prior year quarter; US GAAP net loss in the third quarter of 2017 was $373.8 million compared to $20.5 million in the prior year quarter.
“The operating environment continues to be very challenging, with further declines this quarter in skilled patient admissions and higher levels of nursing wage inflation than in recent quarters,” Hager noted in the earnings report. “These factors served to further compress operating margins in the third quarter of 2017.
“We are very appreciative of the constructive and collaborative support of our key credit partners,” Hager said. “We look forward to executing on the Restructuring Plans, which upon completion, we believe will result in a significantly strengthened capital structure for the company, providing adequate liquidity and free cash flow to allow continued investment in our people and our clinical programs.”
In 2000, the company, then called Genesis Health Ventures Inc. filed for protection from its creditors under Chapter 11 of the Bankruptcy Code. It emerged after reorganization 18 months later.
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