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June 14, 2021 – Amsterdam House Continuing Care Retirement Community, Inc. (dba as "The Amsterdam at Harborside," “AHCCRC” or the “Debtor”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Eastern District of New York, lead case number 21-71095 (Judge TBD). The Debtor, a 501(c)(3) not-for-profit corporation continuing care retirement community (or "CCRC") located in Port Washington, NY, is represented by Thomas R. Califano of Sidley Austin LLP. Further board-authorized engagements include (i) RBC Capital Markets LLC as investment banker and (ii) Kurtzman Carson Consultants LLC as claims agent.
This is the Debtor's second stay in Chapter 11 having filed in this same Court in July 2014 (case number 14-73348) and emerged in November 2014.
The Debtor's lead petition notes between 1,000 and 5,000 creditors; estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn. With the exception of a $1.2mn PPP loan, each of the debtor's 30 largest unsecured creditors are residents with claims relating to their entrance fee deposits ranging from $855k to $1.36mn.
Goals of the Chapter 11 Filing
The Davis Declaration (defined below) provides: "The purpose of this chapter 11 case is to implement a comprehensive balance sheet restructuring and bond financing through a pre-negotiated chapter 11 plan (the 'Plan') that has been negotiated at arm’s length between the Debtor, its sole member, [Amsterdam Continuing Care Health System, Inc.] the trustee to the Debtor’s outstanding revenue bonds (including any successors, the '2014 Bond Trustee') issued by the Nassau County Industrial Development Agency (the '2014 Issuer'), and the holders of approximately 73% of the principal amount outstanding of Series 2014 Bonds…(excluding accreted principal under the Series C Bonds)…(the 'Consenting Holders')."
Treatment of Residents and Entrance Fees
The Davis Declaration provides: "The Plan as proposed allows the Debtor to honor its existing Entrance Fee refund obligations to former residents and provides it the ability to meet the future obligations to current and prospective residents. Entrance Fees paid by Residents and Prospective Residents which signed their Residency Agreements or paid their waitlist deposits on or after October 25, 2020, will be maintained in an escrow pending entry of an order confirming the Plan, for the benefit of the Resident paying such Entrance Fees….Under the Plan, the Debtor seeks to assume all Residency Agreements and to fulfil all of its obligations thereunder."
Plan Support Agreement
The Debtor has entered a June 14, 2021 plan support agreement (the ”PSA,” filed with the Davis Declaration at Exhibit M) with the Member, the 2014 Bond Trustee, and the Consenting Holders; the key terms of which are:
- The funding of an additional $40,710,000 in new money bond financing (the new Series 2021A Bonds) to provide for among other things: (i) the payment of all outstanding Entrance Fee refunds in full; (ii) partial funding of the Debtor’s minimum liquid reserve requirements (“MLRR”) under applicable New York State law; and (iii) a necessary debt service reserve fund;
- The contribution of $9 million from the Member to the Debtor to fund the balance of the MLRR;
- An exchange of the current Series A Bonds and Series B Bonds (as defined below) for a pro rata share of the new 2021B Bonds issued in the aggregate original principal amount of $127,327,200 (the “Bond Refinancing”); and
- The provision of post-bankruptcy credit support from the Member to the Debtor pursuant to a Liquidity Support Agreement (“LSA”), pursuant to which the Member’s obligations will be fully funded from the closing of the sale of a not-for-profit nursing home operated by an affiliate of the Debtor and Member [$3.6mn of the Sponsor Contribution will come from the proceeds of the closing of the sale of the real property located in the hamlet of Mount Sinai within the Town of Brookhaven in Suffolk County], to be dedicated to regulatory compliance, including the funding of future MLRR and Entrance Fee refund obligations. The funds provided under the LSA shall be held in a segregated account at the Debtor and shall not be subject to the Trustee’s liens.
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Davis Declaration”) [Docket No. 2], Davis, the Debtor's President and Chief Executive Officer, detailed the events leading to AHCCRC's Chapter 11 filing. The Davis Declaration provides: “The Harborside has faced historic financial challenges, the effect of which threatens the Debtor’s ability to honor its long-term debt obligations and maintain its operational stability.
The Debtor relies on revenue generated by existing and new Residents to, among other things, maintain its day-to-day operations, service its debt obligations and honor its Resident refund obligations. However, the inability to attract new residents and the burden of statutory requirements regarding the repayment of refunds caused a severe liquidity crisis for the Debtor even before the impact of the COVID-19 pandemic. The pandemic exacerbated these problems. To preserve liquidity during the COVID-19 pandemic, the Debtor ceased making payments on the 2014 Bond Obligations and ceased making payments of Resident Entrance Fee refunds. The failure to make refund payments caused the Debtor to fall out of compliance with the terms of its Residency Agreements and PHL Section 4609, both of which require payment of entrance fee refunds no later than thirty days after the formerly-occupied unit has been resold and in no event later than one year after the formerly-occupied unit has been vacated.
Currently, thirty-three (33) refunds at a total of $20.3 million are unpaid.”
- Bond Debt: In connection with the consummation of the 2014 Plan, the Nassau County Industrial Development Agency (the “2014 Issuer”) issued its (i) $141,585,000 Nassau County Industrial Development Agency Continuing Care Retirement Community Fixed Rate Revenue Bonds (Amsterdam at Harborside Project) Series 2014A (the “Series A Bonds”), (ii) $23,842,500 Nassau County Industrial Development Agency Continuing Care Retirement Community Fixed Rate Revenue Bonds (Amsterdam at Harborside Project) Series 2014B (the “Series B Bonds”), and (iii) $59,537,660 Nassau County Industrial Development Agency Continuing Care Retirement Community Excess Cash Flow Revenue Bonds (Amsterdam at Harborside Project) Series 2014C (the “Series C Bonds” and collectively with the Series A Bonds and the Series B Bonds, the “Series 2014 Bonds”) pursuant to that certain Indenture of Trust (the “2014 Indenture”) dated as of November 1, 2014, between the 2014 Issuer and the 2014 Bond Trustee.
As of the Petition Date, the amounts due and owing by the Debtor with respect to the Series 2014 Bonds are as follows (collectively, the “Bond Claims”): (i) unpaid principal on the Series 2014 Bonds in the amount of $207,793,773; (ii) accrued but unpaid interest on the Series 2014 Bonds in the amount of $6,517,450 as of June 14, 2021; and (iii) unliquidated, accrued and unpaid fees and expenses of the 2014 Bond Trustee and its professionals incurred through the Petition Date. Such amounts, when liquidated, shall be added to the aggregate amount of the Bond Claims.
- Unsecured Debt:
- PPP Loan: The Debtor has a Paycheck Protection Program (“PPP”) loan of $1.15mn issued by UMB Bank, N.A and anticipates that the PPP Loan will be forgiven in its entirety.
- General Unsecured Debt (trade creditors and residents deposits): In addition to the Bond Claims, the Debtor’s primary creditor group consists of general unsecured creditors, who are owed approximately $179.0mn as of the Petition Date. This group includes trade creditors and Residents who have requested refund of their Entrance Fees. As of the Petition Date, the Debtor estimates that it owes approximately $20.3 million to Residents on account of Entrance Fee refund requests,8 and approximately $568,000 to trade creditors, which is largely due to the timing of the filing of this Chapter 11 Case. The Debtor generally remains current on trade debt in the ordinary course of business.
- Subvention Certificate: On March 31, 2004, the ACCHS issued a $3,000,000 subvention to the Debtor. The Debtor proposes that the subvention survive the restructuring, subordinate to all the Series 2021 Bonds.
About the Debtor
According to the Debtor: “The Amsterdam at Harborside is sponsored by Amsterdam House Continuing Care Retirement Community, Inc. (AHCCRC), a not-for-profit organization affiliated with Amsterdam Nursing Home, founded in New York City more than 140 years ago. Amsterdam Nursing Home is widely known and highly regarded for providing care and services that meet the highest standards — comprehensive, individualized and deeply committed to serving the interests of residents.
The Davis Declaration adds: "Incorporated in 2004, the Debtor is a New York not-for-profit corporation that has built and operates The Harborside, a best-in-class senior living community which is situated on approximately 8.9 acres in Port Washington, New York and is dedicated to giving its residents an enriching lifestyle. The Harborside is Nassau County’s first and only continuing care retirement community ('CCRC') licensed under Article 46 of the PHL, and offers its senior residents a continuum of care in a campus-style setting, providing living accommodations and related health care and support services to a target market of seniors aged sixty-two (62) and older. The Debtor’s sole corporate member is Amsterdam Continuing Care Health System, Inc. ('ACCHS' or the 'Member), which is also a New York not-for-profit corporation."
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