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October 28, 2020 – Henry Ford Village, Inc. (“Henry Ford Village” or the “Debtor”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Eastern District of Michigan, case number 20-51066. The Debtor, a Dearborn, Michigan, operator of premier senior living communities, is represented by Danielle Nicole Rushing of Dykema Gossett PLLC. Further board-authorized engagements include (i) FTI Consulting, Inc. as financial advisor and (ii) Kurtzman Carson Consultants, LLC as claims agent.
The Debtor's petition notes between 1,000 and 5,000 creditors; estimated assets between $50.0mn and $100.0mn; and estimated liabilities between $100.0mn and $500.0mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Life Care Companies LLC ($2.79mn), (ii) Plumley Settlement ($800k) and (iii) One Care Pharmacy LLC ($742,924).
Goals of the Chapter 11 Filings
In a motion seeking Court approval to use the cash collateral of bond trustee UMB Bank, N.A., the Debtor stated that it needs to access the cash collateral while it explores its restructuring and/or sale options.
Events Leading to the Chapter 11 Filing
According to the cash collateral motion, "As of the Petition Date, the total outstanding principal obligation owed by Debtor under the Loan Agreement and other Bond Documents is approximately $52.33 million, consisting of approximately $38.45 million owed with respect to the Series 2008 Bonds and approximately $13.88 million owed with respect to the Series 2017 Bonds (the 'Prepetition Obligations'). In connection with the obligations owed under the Loan Agreement and other Bond Documents, Debtor failed to make a principal payment of $775,000 which was due on May 15, 2020. On October 2, 2020, Debtor received a Notice of Default setting forth an Event of Default pursuant to § 9.01(f) of the Loan Agreement on the basis that the Debtor is insolvent or is unable to pay its debts generally as they become due. On October 22, 2020, Debtor received notice from the Bond Trustee that the 'principal of all of the Outstanding Bonds, the payment of the loans, all interest accrued thereon and any other payments due' by the Debtor under the Bond Documents were due and payable in full.
Pursuant to the Bond Documents, the Bond Trustee controlled various reserve accounts (the 'Trustee Reserve Accounts') supporting the loans to Debtor arising out of the bond financing consisting of a Revenue Fund (the 'Revenue Fund'), a Debt Service Fund ('DSF'), a Debt Service Reserve Fund (the 'DSRF') and a Construction Project Fund (the 'Construction Project Fund'). Immediately prior to the Petition Date, Debtor believed that the Revenue Fund contained approximately $2,000.00, the DSF contained approximately $6.00, the DSRF contained approximately $4,338,986.00 and the Construction Project Fund contained approximately $83.00 in available funds. On October 22, 2020, the Bond Trustee on behalf of the bondholders notified Debtor that, as the Bond Trustee had elected to accelerate the obligations under the Bond Documents, it had also set off against the Debtor’s obligations all of the funds in the Trustee Reserve Accounts, and thus no monies remain in the Trustee Reserve Accounts."
In addition, according to an April 22, 2020 Legal Notice, the Wayne County Circuit Court had preliminarily approved a Class Action Lawsuit settlement under which the Debtor and other defendants have agreed to pay $1.15mn to a Settlement Fund to be distributed over time to Class Members. The Settlement was approved on a final basis on August 21, 2020, according to court documents linked to a website providing information on the Lawsuit.
According to the notice, "The Lawsuit was filed on behalf of Henry Ford Village ('HFV') residents, former residents and the estates of former residents who signed a 'Residence and Care Agreement' prior to December 1, 2000. The Lawsuit alleges that HFV and certain of its property managers have not been refunding 100% of some of these residents' entrance deposits when residents vacate their units at HFV. [Lead Plaintiff David] Plumley alleged that Defendants misled certain of the residents (or the representatives of their estates) into signing an amendment or addendum that reduces their refund from the amount promised in residents’ original Residence and Care Agreement to an amount less than the 100% entrance deposit refund. Mr. Plumley also alleged that certain other residents who did not sign an amendment or addendum have not received the refund to which they are entitled. Defendants HFV and its property managers denied all of these claims in the Lawsuit and asserted many defenses, including that all residents (or their representatives) have been or will be paid the full refunds to which they are contractually entitled."
Board minutes included in the Petition provide: "Dykema provided a thorough and detailed presentation of legal issues relevant to the financial situation of the Corporation, including a report on a recent hearing regarding the Plumley litigation. The Board discussed the information presented by Dykema regarding legal options including the potential of filing a voluntary petition for relief for the Corporation under the bankruptcy provisions of chapter 11 of title 11 of the United States Code, the bankruptcy process and the interview process for investment bankers, marketing companies and other advisors to the Corporation with respect to a potential sale of the Corporation’s facility in conjunction with any bankruptcy proceedings."
As of the Petition Date, the total outstanding principal obligation owed by Debtor under the Loan Agreement and other Bond Documents is approximately $52.33 million, consisting of approximately $38.45 million owed with respect to the Series 2008 Bonds and approximately $13.88 million owed with respect to the Series 2017 Bonds (the “Prepetition Obligations”).
About the Debtor
According to the Debtor: “Debtor is a not for profit, non-stock corporation established to operate a continuing care retirement community located at 15101 Ford Road, Dearborn, Michigan 48126. Debtor provides senior living services comprised of 853 independent living units, 96 assisted living unites and 89 skilled nursing beds. (the 'Facility'). Debtor is governed by an independent Board of Directors and is advised by a Resident council elected by the residents of Debtor."
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