Henry Ford Village announced on Tuesday that it agreed to a $69 million stalking horse bid — a move which signals a potential exit from Chapter 11 bankruptcy protection for the 1,038-bed nonprofit continuing care retirement community (CCRC) in Dearborn, Michigan.
The bidder is MED Healthcare Partners, a provider of assisted living, skilled nursing services and rehabilitation services with a portfolio of over 150 skilled nursing facilities, 20 assisted living and memory care communities, and five CCRCs in 20 states. The firm is headed by Ephram “Mordy” Lahasky of Hewlett, New York.
HFV filed for Chapter 11 bankruptcy protection in November of 2020. Filing documents listed a litany of challenges the CCRC faced over the years including increased competition, the 2008 housing crisis and Great Recession, and the bankruptcies of nearby General Motors and Chrysler which adversely impacted the number of seniors able to sell their homes to finance a move to the campus, located on the site of automaker Henry Ford’s birthplace.
A 2014 class action lawsuit resulted in a settlement agreement in 2019, where HFV and other defendants agreed to pay $800,000. A possible refinancing of the community’s debt last year was derailed by the coronavirus pandemic, which also placed further pressures on operational costs and occupancy. The CCRC filed a motion seeking relief from the class action settlement last October. The court rejected the motion, leading HFV to file for bankruptcy.
A stalking horse bid is the initial bid on the assets of a bankrupt asset, effectively establishing a low-end bidding floor once the building goes up for auction and ensuring that bidders cannot underbid the purchase price. By setting the bidding floor, the bankrupt asset seeks to realize a higher profit at auction.
Other buyers can submit competing offers, but by placing the stalking horse bid, the bidder is granted certain incentives including expense reimbursement, breakup fees, exclusivity for a set period of time, negotiate the terms of an acquisition and choose what parts of a bankrupt asset it wishes to buy.
Moreover, the stalking horse bidder can negotiate bidding options that discourage competitors from bidding.
MED Healthcare Partners is no stranger to stalking horse bids. In February 2020, the firm entered a stalking horse agreement for Mount Royal Towers, a CCRC in Birmingham, Alabama.
“We’re pleased to establish a solid baseline bid at this stage of our restructuring as we move our community forward towards successfully emerging bankruptcy in a manner that maintains the health, safety and lifestyle of our residents for years to come,” HFV Chief Restructuring Officer Chad Shandler said in a statement.
An April 30 deadline has been set for competing offers. A court hearing to approve a sale is scheduled for May 24.
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