Chateau Senior Services

Division: Phoenix Management Services


Client

Chateau Senior Services, LLC, et al. (“Chateau" or the “Company”) was a privately-held operator of nursing home facilities in Pennsylvania and Massachusetts with annual revenues of approximately $40 million.

Problem

The Company entered into a sale leaseback transaction for the five nursing home facilities it owned and operated. Prior to and continuing after the sale leaseback transaction, the Company experienced State licensing issues with one of its facilities which resulted in a working capital drain on the business. The following year, one of the Company’s other more profitable nursing home facilities experienced issues with the State Department of Health, resulting in a temporary closure of the facility and reduction in census from 95% historically to a low point of 76%. The combination of these factors, coupled with substantial monthly rental obligations as a result of the sale leaseback transaction, contributed to Chateau filing a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.

Solution

Phoenix Management Services was engaged by the Official Committee of Unsecured Creditors of Chateau (the “Committee”) to: assist the Committee in reviewing and analyzing the Debtors’ on-going business operations by facility. Phoenix assisted the Committee in gaining clarity into the Debtors’ operational, financial, and expense controls and provided an assessment of the Debtors’ organizational structure and the effectiveness of its management processes, which allowed the Committee to fully understand the possible outcomes of the case and how their constituents may be best served in recovering their balances owed. Further, Phoenix reviewed the owners’ historical and current compensation, including management fees, salaries, perks and other and the appropriateness relative to the Company’s financial condition and the overall understanding of the Debtors’ short-term cash and liquidity requirements. During the course of the case, Phoenix developed a variety of scenarios illustrating the cash flow maximum downside and to determine if there was enough free cash flow to provide post-petition payments to the Committtee without stretching payables as had historically been the case. Lastly, Phoenix evaluated the Debtor’s Plan of Reorganization with existing management remaining as well as potential Plans that would result in some or all of management replaced and/or other strategic options including a ”˜363’ sale of the business.