Clare Oaks Bondholders Announce Chapter 11 Plan To Stabilize And Invest In The Community

BARTLETT, Ill., June 19, 2020 /PRNewswire/ -- The majority bondholders for the Clare Oaks retirement community today shared their plans to keep residents in their homes and protect the senior citizens' financial investments in the continuing care retirement community.  Clare Oaks filed for bankruptcy in 2019, the second time they have taken such an action.

Certain funds managed by Lapis Advisers, LP and Amundi Pioneer Asset Management, Inc., filed a chapter 11 plan of reorganization in US Bankruptcy Court for the Northern District of Illinois, Eastern Division to restructure the financially challenged Clare Oaks community.  They laid out their restructuring plan (the Bondholders Plan) for the continued operation of Clare Oaks with minimal disruption to the residents. Equally important, the Bondholders Plan, according to court documents "repositions Clare Oaks on a solid path of financial stability and future growth" and according to the majority bondholders, is the only feasible plan that can accomplish that goal.  The Bondholders Plan and all filings are available at https://case.stretto.com/clareoaks.

Highlights of the Bondholders Plan are as follows:

• Invest $5 million for critical capital improvements to the community including the healthcare center.
• Bring in professional management with a proven record of success operating similar communities.
• Restructure the bondholders' secure debt by reducing the principal amount by over $32 million.
• Substantially eliminate the current "queue based" entrance fee refund contract for the "unit sale" entrance fee contract, which is an industry best practice.

The additional funds will be used for important health and life safety improvements at Clare Oaks. They will also help to convert half of Clare Oaks' underutilized skilled nursing beds into more desired assisted living units. These units will meet community needs and improve the financial outlook for Clare Oaks. 

The Bondholders Plan will bring in an independent professional management company.  The chosen firm will have experience acquiring and managing financially challenged senior living communities such as Clare Oaks. 

"We are excited to bring about a successful management change for Clare Oaks and its residents.  We believe in this non-profit community and intend to invest substantial additional funds," said Kjerstin Hatch, a principal with Lapis Advisers, LP. "We are disappointed that current management has chosen to put forth misleading and inflammatory statements with regards to our restructuring plan and encourage all constituents to read our disclosure statement and plan once it has been approved by the judge for dissemination." 

Lapis has a successful track record of turning around underperforming continuing care retirement communities and will select a management company which demonstrates the same type of success. Lapis wants to insure that the current residents live with substantially the same or better contract terms and services after bankruptcy and never have to go through this process again.

Not only does the Bondholders Plan provide for financial stability at Clare Oaks, it also proposes only one modification to the residency agreement for consenting independent living residents.  It will guarantee that when an independent living resident leaves their unit, even if they stay at the community through a higher level of care, he or she will receive their refund once a new resident pays an entrance fee and occupies that unit.  This one modification to residency agreements is considered best practice and is consistent with the practice of the majority of continuing care retirement communities offering an entrance fee model.

SOURCE Clare Oaks Bondholders