May 2, 2019
Texas-based The LaSalle Group Inc., an owner of 40 memory care assisted living communities across 9 states, and a handful of affiliated debtors filed for bankruptcy on May 2, 2019 and things ain’t looking pretty for the unsecured creditors: the company is administratively insolvent. The company owes $3.7mm at the parent level and then has ~$27.8mm of opco level debt among four debtor LLCs that are all owned 52% by a third-party investor (“Realco Silverado Investor”). Realco Silverado Investor seeks to purchase the opcos for $29mm, just enough to clear the debt at the opco level. Per the company, “[i]n the event this sale closes…[the notes]…should all be paid in full, all employees will have continual job opportunity, and all residents will remain in the residence they and their loved ones have chosen.” The bright side? This sounds like a good result for those most in need of it.
Why is the company in bankruptcy? It states:
“A surge in construction of assisted living facilities in recent years has created a supply-demand imbalance resulting in greater competition for residents and lower rates. This market dynamic has significantly impacted LaSalle and its affiliated entities (collectively, the “Autumn Leaves Group”) from a cash flow perspective. The Autumn Leaves Group has struggled with occupancy rates in certain markets which has significantly impacted revenue and cash flow.”
Moreover, LaSalle is the guarantor of substantially all of the secured debt and lease obligations. Its cash flow constraints precluded it from servicing its debt, culminating in approximately 30 lawsuits currently pending against LaSalle. As if that wasn’t bad enough, LaSalle also suffered the brunt of a United States District Court for the Northern District of Illinois, Eastern Division Memorandum Opinion and Order granting a motion for conditional certification of a collective action against it related to alleged hourly rate wage claims. And as if THAT wasn’t bad enough, LaSalle also faces various suits from vendors and other creditors for disputed unpaid claims. They’re all about to get hosed. The assets that aren’t sold to Realco Silverado Investor will be liquidated.
Jurisdiction: N.D. of Texas (Judge Jernigan)
Legal: Crowe & Dunlevy PC (Vickie Driver, Christina Stephenson, Christopher Staine)
Financial Advisor/CRO: Harney Partners (Karen Nicolaou)
Claims Agent: Donlin Recano & Company Inc. (*click on the link above for free docket access)
Other Parties in Interest: