💥New Chapter 11 Bankruptcy Filing - Genesis Healthcare, Inc.💥
Acute care provider is the latest in a string of big healthcare companies to file for BK.
On July 9, 2025, PA-based Genesis Healthcare, Inc. ($GENNQ) (“Genesis”) and 298 affiliates (collectively, together with Genesis, the “debtors”) filed chapter 11 bankruptcy cases in the Northern District of Texas (Judge Jernigan). Founded in ‘85, the debtors are “… one of the largest post-acute care providers in the United States, currently operating approximately 175 facilities across 18 states, with more than 27,000 employees.”
The debtors’ 40-year history is a complicated mess, so we’ll skip most of it. Today, their business focuses primarily on inpatient services, as well as related ancillary businesses (e.g., rehabilitation and respiratory therapy services) and ownership interests in non-debtor joint ventures (“JVs”), which generated an aggregate ~$3.3b in revenue in ‘24.
But let’s back up to April ‘11, where, for our purposes, the debtors’ story kicks off. That month the debtors’ predecessor, Genesis HealthCare Corporation (“GHC”), knocked down the first chapter-11-bound domino by selling 147 “… skilled nursing, and assisted living facilities …” to Welltower, Inc. ($WELL) (“Welltower”) for $2.4b and triple-net-leased ‘em right back.
The next year, in December ‘12, the debtors’ then-parent, owned by Formation Capital, LLC and JER Partners, acquired Sun Healthcare Group, Inc., a skilled nursing provider. The two then merged in February ‘15, resulting in Genesis, which “ … increased the Company’s existing skilled nursing portfolio to more than 500 skilled nursing centers in 34 states and expanded its rehabilitation therapy business to more than 1,600 service locations in 46 states and the District of Columbia.”*
Way too big. Tell us how that went, co-CRO and first day declarant Louis E. Robichaux IV (of Ankura Consulting Group, LLC (“Ankura”)):
“[A]s the Company continued to grow in size and scale, those growth metrics did not translate into increasing profitability. Rather, through these expansion efforts, the Company’s operations became increasingly more difficult to manage, subject to significantly disparate state landscapes, and mired in corporate inefficiencies that followed numerous mergers and acquisitions.”
So from ‘18 to ‘20, the debtors divested themselves of properties and, with a subset of ‘em, created JVs with partners, including Vantage Point Capital-owned Seafire NEMA Holdings, LLC (“Seafire”), which *spoiler alert* made a first-day appearance.
But by ‘20, the debtors were already facing mounting legacy tort and vendor liabilities, the former of which was costing them ~$8mm per month. But then COVID, and pandemic pressures – inflation, supply shortages, labor costs, insufficient reimbursement rates – damn near pushed them over the ledge. The debtors engaged Ankura in August ‘20 to prep for a filing but avoided that by the skin of their teeth thanks to a March ‘21, $50mm purchase of convertible notes by ReGen Healthcare, LLC (“ReGen”), which was increased by another ~$50mm over the next two years.**
Right around the time of ReGen’s initial investment, the debtors focused on righting the ship. They brought on a whole new management team, which focused on getting rid of loss-generating facilities. Over time, the debtors’ facility count dropped from that high of 500 ☝️to the petition date’s 175.
But …
Because while the debtors’ “… primary lease portfolios are generating positive EBITDA …” today, their $113mm in annual expense – spread across debt, CapEx, litigation settlements, Internal Revenue Service (“IRS”) installment payments,***and repayment of advances due to a cyber security attack – did ‘em in. Even after shedding sh*tty locations, the debtors generated “… approximately $119.2 million and $166.3 million in negative free cash flow in 2021 and 2022, respectively” (emphasis in original).
Which brings us to the total clusterf*ck of a debt stack. To start, here’s the secured piece:
And the unsecured liabilities are even uglier …
All in, it tallies up to …
… ~$2.3b. Paired with those recurring hundred-million-dollar losses, the debtors needed to restructure. First, the debtors tried engaging with prepetition term loan lenders on an out-of-court but, per Mr. Robichaux, that “… would not provide a sustainable solution, and therefore did not come to fruition.”
Then news broke that a chapter 11 was on the table, so plaintiffs lawyers started filing collection actions and vendors cripped trade, making a filing a foregone conclusion.
But the debtors don’t enter chapter 11 emptyhanded. They’ve got a DIP and agreement on a “clear” exit. We’ll tackle those in order.
The DIP is a $30mm term loan ($12mm interim) provided by Welltower-affiliate-and-prepetition-lender Markglen, Inc., ReGen-affiliate-and-prepetition-lender WAX Dynasty Partners LLC (“WAX”), and landlord-affiliate-and-prepetition-lender OHI Mezz Lender LLC (“OHI”). And here’s something uncommon: it’s junior, behind the prepetition funded debt and landlord liens. Apparently certain (unnamed) prepetition secured parties weren’t so keen on getting primed, and the debtors didn’t want to engage in a first-day litigation festival. So all that secured sh*t ⬆️, as well as all lease liens, come first. The DIP carries interest at 15% (PIK) and has a 2% upfront fee (PIK) and a 4% exit fee.
Turning to the exit, it will be a section 363 sale, backed by WAX-affiliate and stalking horse**** CPE 88988 LLC (“CPE”), which, c’mon, who came up with that name (😵💫)? Anyway, CPE is credit bidding $14mm of the DIP (so all DIP lenders are on board), plus having the buyer assume the other $16mm of DIP claims and the full amount of the term loan loans (~$317.7mm), plus paying $15mm in cash, plus paying a sufficient (and unknown) amount of cash to exercise the debtors’ right to purchase facilities under two of its JV arrangements.*****
The debtors’ proposed, DIP-milestone-mirroring bidding procedures contemplate the following timeline:
The court held a brutal 4.75-hour-long first-day hearing on July 11, 2025, but once again, we can’t tell you much about it because claims agent Epiq Corporate Restructuring, LLC keeps stripping the g-ddamn audio.
In any event, we know one of the issues was the debtors’ “comfort” motion to restate and enforce the automatic stay because JV-partner Seafire objected, saying it went too far and affected non-debtor-on-non-debtor action. Eventually, though, Judge Jernigan granted all first-day relief in some form or another — there were modifications along the way, but Johnny flat-out refused to run redlines, so 🤷♀️ — and scheduled the second-day hearing for August 5, 2025 at 9:30am CT.
The debtors are represented by McDermott Will & Emery LLP (Daniel Simon, Emily Keil, William Guerrieri, Marcus Helt, Jack Haake, Grayson Williams) as legal counsel, Ankura (Louis Robichaux IV, Russell Perry) as financial advisor, and Jefferies, LLC ($JEF) (Ryan Hamilton, Danny Homrich, Nick Aleman, Jeffrey Finger, Jaspinder Kanwal, Connor Bishop, Matthew Decker, James Burgoyne) as investment banker. The debtors’ special restructuring committee is composed of Jon Foster, Liz LaPuma, and William Snyder and represented by Katten Muchin Rosenman LLP as legal counsel. Welltower-affiliates Welltower OP LLC and Markglen, LLC are represented by Gibson, Dunn & Crutcher LLP (John Cox III, Jeffrey Krause, Michael Farag) as legal counsel. OHI is represented by Goodwin Proctor LLP (Robert J. Lemons) and Ferguson Braswell Fraser Kubasta PC (Leighton Aiken) as legal counsel. Prepetition ABL lender White Oak Healthcare Finance, LLC is represented by Blank Rome LLP (Joseph Welch, Kenneth Ottaviano, Paige Tinkham, Jordan Williams) as legal counsel. CPE and WAX are represented by DLA Piper LLP (James Muenker). Seafire is represented by Kirkland & Ellis LLP (Steven Serajeddini, William Arnault, Casey McGushin, Connor Casas) and Porter Hedges LLP (John Higgins, Eric English).
*Because 500+ centers and 1.6k service locations wasn’t already enough, 🙄, the company entered into even more deals in June ‘15 to further expand its footprint, focusing largely on the Chinese market.
**That same month, the debtors voluntarily withdrew from the New York Stock Exchange, although their shares continue to trade over the counter.
***Under the CARES Act, the debtors deferred the payment of social security taxes to the IRS but didn’t have enough cash when the deferrals became due in December ‘21 and ‘22, resulting in a June ‘24 installment plan.
****If approved as the stalking horse, CPE’s bid does not include a break-up fee, but there is an up-to $750k expense reimbursement.
*****The purchase options implicate 15 facilities sold to NextGen Investors, LLC in January ‘19 and 9 facilities owned by CCGEN Holdings, LLC, so it should wind up being a decent chunk of change. The debtors sent a notice to each electing the purchase option before filing for chapter 11.
Company Professionals:
Legal: McDermott Will & Emery LLP (Daniel Simon, Emily Keil, William Guerrieri, Marcus Helt, Jack Haake, Grayson Williams)
Financial Advisor: Ankura Consulting Group, LLC (Louis Robichaux IV, Russell Perry)
Investment Banker: Jefferies, LLC ($JEF) (Ryan Hamilton, Danny Homrich, Nick Aleman, Jeffrey Finger, Jaspinder Kanwal, Connor Bishop, Matthew Decker, James Burgoyne)
Special Restructuring Committee: Jon Foster, Liz LaPuma, William Snyder
Legal: Katten Muchin Rosenman LLP
Claims Agent: Epiq (Click here for free docket access)
Other Parties in Interest:
Prepetition Term Loan and DIP Lender: Welltower OP LLC and Markglen, LLC
Legal: Gibson, Dunn & Crutcher LLP (John Cox III, Jeffrey Krause, Michael Farag)
Prepetition Term Loan, DIP Lender, and Landlord Affiliate: OHI Mezz Lender LLC
Legal: Goodwin Proctor LLP (Robert J. Lemons) and Ferguson Braswell Fraser Kubasta PC (Leighton Aiken)
Prepetition Term Loan, DIP Lender, and Stalking Horse: WAX Dynasty Partners LLC and CPE 88988 LLC
Legal: DLA Piper LLP (James Muenker)
Prepetition ABL Lender: White Oak Healthcare Finance, LLC
Legal: Blank Rome LLP (Joseph Welch, Kenneth Ottaviano, Paige Tinkham, Jordan Williams)
Joint Venture Partner: Seafire NEMA Holdings, LLC
Legal: Kirkland & Ellis LLP (Steven Serajeddini, William Arnault, Casey McGushin, Connor Casas) and Porter Hedges LLP (John Higgins, Eric English)
Official Committee of Unsecured Creditors
Legal: Proskauer Rose LLP (Brian Rosen, Ehud Barak, Timothy Karcher, Daniel Desatnik) and Stinson LLP (Nicholas Zluticky, Zachary Hemenway, Miranda Swift)
Financial Advisor: FTI Consulting Inc. (Narendra Ganti)
Investment Banker: Houlihan Lokey Capital Inc. (Andrew Turnbull)