Wilmington, Del. — Genesis HealthCare has won court approval to borrow an additional $80 million in debtor-in-possession financing, a move aimed at keeping the struggling skilled nursing chain operational as it works toward finalizing the sale of its assets.
U.S. Bankruptcy Court Judge Stacey Jernigan signed off on the deal Wednesday, allowing Genesis to pay off an earlier $30 million bankruptcy loan and cover upcoming payroll obligations. The company told the court it needed the funds by early March to continue covering operations and rent payments.
Genesis, which is in the process of selling roughly 300 subsidiaries to 101 West State Street in a deal valued at approximately $996 million, said cash pressures had been mounting — not because of weak operations, but because the bankruptcy timeline had stretched longer than expected.
“These circumstances have been driven principally by the extended timeline, and the continued incurrence of professional fees and other administrative expenses,” the company wrote in a court filing. It noted that weekly payroll alone averages roughly $30 million, leaving little cushion between cash cycles.
Lenders Step Back In
Genesis initially lined up financing through JMB Capital Partners Lending but ultimately secured a refinancing deal with its existing group of lenders, which includes landlords and investors already involved in the case.
Under the revised terms, Genesis can access $80 million immediately. An additional $25 million has been pledged to cover costs through the final approved sale deadline of Sept. 30, though release of those funds hinges on the outcome of a separate settlement dispute expected to be resolved in March.
The new loan carries 12% interest along with significant fees and could reduce the payout to creditors at the conclusion of the bankruptcy. Despite that, Jernigan said the deal had the backing of the core creditors committee and offered better terms than the original JMB proposal.
Fee Dispute Lingers
The judge did not immediately approve more than $1 million in fees sought for JMB, which Genesis credited with drawing its current lenders back to the table. Jernigan said she was having a “hard time” with the size of the fee and asked for legal precedents before ruling.
Still, she approved the loan itself, warning that Genesis would soon face “tough decisions” about whom to pay without the additional capital.
Genesis attorneys told the court they hope to close on the sale by the end of June.
