Seeking to restructure its $1.5 billion debt to avert a bankruptcy filing, Genesis Health Ventures announced yesterday that it has received a 40-day extension from its lenders.
Genesis missed a $3.8 million payment in March, triggering a 60-day grace period that would have expired this week.
Another nursing home chain managed by and closely aligned with Genesis, the Multicare Companies, also announced a 40-day grace period, as well as the sale of 14 facilities in Ohio for $36.5 million in cash.
Based in Kennett Square, Pa., Genesis has nearly 6,000 employees in Maryland, where it owns, leases or manages under contract about 50 nursing homes. It also owns the NeighborCare pharmacy chain."The extension is kind of a help, but selling [the Multicare facilities] is a bigger one," said Robert M. Mains, an analyst with Advest Inc. in Saratoga Springs, N.Y. "It means they will have cash to make interest payments."
Like other large nursing home chains, Genesis grew rapidly in the past decade, acquiring a number of nursing homes and related businesses, such as NeighborCare, but building up substantial debt.
Last year, the federal government cut Medicare payments, and several of the chains had difficulty making their debt payments. Four of the seven largest chains, including Sparks-based Integrated Health Services, filed for bankruptcy. About 10 percent of the country's 17,000 nursing homes are operating under bankruptcy protection.
Genesis "is a good company, but they're operating in a challenging environment, and I don't know if they'll make it," Mains said.
Genesis owns, leases or manages 333 nursing homes and 35 assisted-living facilities with 41,000 beds in 17 states, making it the country's fifth-largest long-term-care chain. It owns a minority stake in Multicare.
The Multicare sale was to Trans Healthcare Inc. of Camp Hill, Pa. At about $32,000 per bed, Mains said, the price is within the range of other recent nursing home sales, which have ranged from $28,000 to $47,000 per bed. "It's a distressed seller, but they were able to get it done, " he said.
Genesis has said that it is trying to sell assets to pay down its debt, but that potential buyers have had difficulty getting financing, given the difficult long-term-care market.
During the extension, Genesis said, it will make "a substantial portion of current interest payments due."
Genesis stock rose 3.125 cents to 43.75 cents a share yesterday. The shares were trading at $1.50 before the missed payment in February.