Essential healthcare company files for Chapter 11 bankruptcy
The company enters the bankruptcy process with the support of key creditors but survival is not guaranteed.
Just because a company provides a key service does not mean it will be financially successful. That has been clearly evident in recent months as RiteAid's struggles have led the key healthcare and pharmacy brand to close hundreds of locations.
Sometimes financial pressures can drag down a business despite it having widespread public support. In some cases, you can blame the lingering impact of the Covid pandemic.
Related: Iconic grocery chain closing underperforming stores
You could argue that Covid-related shutdowns contributed to the death of Bed Bath & Beyond, Tuesday Morning, and Christmas Tree Shops. All three of those companies took on expensive debt to make it through the pandemic and sales never recovered to a point where those chains could pay their bills.
In other cases, companies misjudged their popularity given the unique conditions created by the pandemic. Peloton, for example, became incredibly popular during the period when gyms were closed or operating under strict rules.
Owning one of the company's connected exercise bikes became a status symbol, but it was a boom that pulled forward demand. Only so many Americans want a connected fitness product that comes with a monthly fee that's higher than many gym memberships.
Most of those people bought a Peloton product during the darkest days of Covid, after which demand dried up for the company.
Not all financial struggles can be blamed on Covid. Some companies, even those that meet a key consumer need, can fail and that has happened with a large healthcare provider. Image source: Pixabay.
Senior healthcare company files Chapter 11 bankruptcy
The need for senior living facilities is expected to grow as more Americans turn 65 or older.
"More than 3,000 new nursing homes could need to be built to keep up with demand as the older population expands," according to Senior Living.
That's a number that's going to be challenging to meet given the unique challenges of the industry.
"Building new nursing facilities is easier said than done, partly because nursing homes are notoriously challenging to staff. This problem has gotten worse due to the current economic situation. According to a survey by the American Health Care Association and National Center for Assisted Living, 87% of nursing homes deal with moderate to high staffing shortages, and 61% limit new admissions due to workforce issues," the website shared.
Intense demand for its services has not helped one leading senior care provider.
"LaVie Care Centers, LLC, an operator of 43 licensed skilled nursing facilities in five states, has taken steps to implement a financial restructuring designed to improve its capital structure and position the company for long-term success," the company shared in a press release.
The moves the company has made and plans to make will not impact its operations.
"This process not only ensures that the company can continue operating its existing portfolio in a seamless manner, but it also addresses its legacy liabilities associated with previously-divested operations. To facilitate this process efficiently and with minimal disruption to ongoing operations, the company has filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Georgia," it added.
Related: Popular beverage retailer files Chapter 11 bankruptcy
LaVie expects to continue operations
When a retail chain or a restaurant files for bankruptcy or goes out of business, it's not a life-or-death situation. That's not the case with La Vie, given that it provides care to tens of thousands of senior citizens.
Because of that, the company has tried to assure its customers that it will survive the Chapter 11 bankruptcy process and will continue operating normally during it.
"LaVie Care Centers and the current facilities in its portfolio will continue operations as normal, ensuring that all necessary care and treatment will be provided to its residents," the company shared.
To fund its operations during the Chapter 11 bankruptcy process, the chas secured a commitment of $20 million in debtor-in-possession financing from key stakeholders, including affiliates of Omega Healthcare Investors, the company's largest landlord and secured lender.
"Following Court approval, this new DIP financing, combined with cash on hand and cash flow generated from ongoing operations, will support the business to satisfy its ongoing obligations, and enable the Company to remain focused on delivering quality care during the Court-supervised process," LaVie added.
"Today's announcement is an important step forward to strengthen the Company's financial footing in order to combat some of the challenges faced by the skilled nursing industry generally since the COVID-19 onset, as well as potential looming challenges ahead," said M. Benjamin Jones, the company's newly-appointed Chief Restructuring Officer.
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