Nursing Home Operator With 175 Facilities Files For Bankruptcy

Genesis Healthcare's Merry Wood Lodge Nursing Home In Elmore, Alabama.

A major nursing home operator that owes money to a pair of REITs has filed for bankruptcy.

Pennsylvania-based Genesis HealthCare owns 175 nursing facilities across the country, but the company said that due to financial hardships in recovering from the pandemic and a rise in litigation, it had to file for bankruptcy, The Wall Street Journal first reported.

The financial hurdles include an $8M-per-month settlement and defense costs over injury and death claims. One instance included the company's Quinnipiac Valley Center in Connecticut having to be shut down due to safety concerns after the deaths of two residents in 2022.

ReGen Healthcare, another nursing home operator, has entered a stalking horse bid to acquire Genesis and its assets, the WSJ reported. The company has invested $100M in Genesis across multiple capital infusions.

Genesis secured a $30M commitment from lenders to fund its bankruptcy proceedings and retain staffing at its facilities, according to the WSJ. The company's properties have more than 15,000 residents and 27,000 employees.

Genesis owes roughly $700M to secured creditors, including Welltower, a REIT with a $100B market cap, and Omega Healthcare Investors, another REIT it leases properties from, according to the WSJ.

Welltower and Genesis' relationship began in 2011 after the operator transferred almost all of its real estate assets to the landlord in a $2.4B deal.

In March 2021, Welltower announced its intention to largely sever ties with Genesis.

By the end of that year, Welltower had entered into agreements to transition 51 Genesis properties to other operators, the REIT said in its 2022 annual report.

But as of the end of last year, Genesis still owed Welltower $290M in unsecured notes and $167M in secured notes, the REIT said in its most recent annual report. Welltower said it sold the unsecured notes and a portion of the secured notes, while the remainder of the secured notes had their maturity extended to June 30, 2026.

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