Mintz Levin Represents National Benevolent Association's Bondholders in One of the Largest Not-for-Profit Bankruptcies
4/20/2005
Bondholders Receive $230 Million, Repayment of all Principal, Accrued Interest
Boston, MA - Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC represented the majority of the creditors in the Chapter 11 bankruptcy reorganization of The National Benevolent Association (NBA), which successfully emerged from bankruptcy through a Plan of Reorganization on April 15. The Reorganization Plan resulted in a payment of more than $230 million to unsecured creditors, including payment of their entire outstanding principal and accrued interest, in addition to interest accruing after the commencement of bankruptcy. Mintz Levin attorneys Paul Ricotta, Ann-Ellen Hornidge and Leonard Weiser-Varon served as counsel to Kansas City, MO-based UMB Bank, as trustee for the debtor's fixed rate bondholders. They also served as M&A counsel to all of the creditors in the bankruptcy case in connection with the sale of NBA's assets.
NBA, based in St. Louis Missouri, provided senior housing and family and disabled services in multiple states. The organization filed for bankruptcy on February 17, 2004. The filing represents one of the largest not-for-profit Chapter 11 bankruptcies ever commenced. NBA's primary creditors were holders of tax-exempt bonds, which were issued to finance the organization's acquisition and expansion of thousands of senior housing units in nine different states.
"Unfortunately, managing senior care assets was not among NBA's core competencies and the resulting cash drain from the senior care assets and other operations, coupled with a stock market decline and precipitous erosion in the charity's investment returns, put the charity in technical default on the loans," said Mr. Ricotta.
In its bankruptcy filing NBA sought to restructure or unilaterally reduce its debt, but the creditors were able to demonstrate that, through asset sales and available cash, it was feasible for the unsecured creditors to be repaid in full. The Court denied the debtors' motion to secure $50 million in DIP financing early in the case based primarily on the fact that the debtors had over $100 million in cash and investments, including 11 senior care facilities and skilled nursing homes. Immediately after the DIP financing was denied, Judge Ronald King, who presided over the bankruptcy, appointed a mediator to work with NBA, its creditors, thirteen different Attorneys General and the debtor's senior housing residents, which resulted in an agreement on the sale of the organization's assets. Ultimately, the debtor's senior housing assets were sold to a single purchaser for $210 million.
"This is a remarkable recovery for the creditors," added Ricotta. "It is also a win for the many residents of these facilities, some of whom invested substantial amounts of money in entrance fees. They will now have the peace of mind that these facilities are being well-run and soundly managed."
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