BETHESDA, Md. and TOLEDO, Ohio, March 2,
2018 /PRNewswire/ -- Quality Care Properties, Inc. (NYSE:
QCP) ("QCP" or the "Company") and HCR ManorCare, Inc. ("HCR
ManorCare") today announced that they have reached an agreement to
transition the ownership and leadership of HCR ManorCare, including
its skilled nursing, assisted living, hospice and homecare
businesses to QCP. The transaction is expected to
recapitalize HCR ManorCare and provide stability and flexibility to
better react to today's rapidly changing post-acute care
industry. Under QCP's ownership and with new leadership, HCR
ManorCare will continue to focus on providing superior patient care
in this vital sector of healthcare.
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QCP and HCR ManorCare have agreed to effect this transaction
through a prepackaged plan of reorganization pursuant to a Plan
Sponsor Agreement entered into between the parties. HCR
ManorCare, Inc., the parent holding company for the HCR ManorCare
operating businesses, will voluntarily file for Chapter 11 under
the United States Bankruptcy Code in the coming days. HCR
ManorCare's operating subsidiaries will not file for Chapter 11 and
the parent company's Chapter 11 filing will have no impact on
patient care or the subsidiaries' operations. Under the terms of
the Plan Sponsor Agreement and as contemplated in the prepackaged
plan of reorganization, all HCR ManorCare employees, creditors,
vendors and suppliers, aside from QCP, are expected to be
unimpaired by the transaction and paid in the ordinary course when
due. The transaction is subject to bankruptcy court approval
of the prepackaged plan of reorganization and customary closing
conditions, including regulatory approval. Bankruptcy court
approval is expected during the second quarter and the transaction
is expected to be completed during the third quarter of 2018.
Effective immediately, Guy
Sansone, a Managing Director and Chairman of the Healthcare
Industry Group at global professional services firm Alvarez &
Marsal with significant skilled nursing care facility operating
experience, and Laura Linynsky,
QCP's Senior Vice President and a former Chief Operating Officer of
Sunrise Senior Living, Inc., will serve on behalf of QCP as
consultants and work closely with the HCR ManorCare management team
in order to facilitate a smooth transition of leadership and
ownership. Following the completion of the transaction, Mr.
Sansone is expected to assume the role of HCR ManorCare's Chief
Executive Office and Ms. Linynsky is expected to serve as HCR
ManorCare's interim Chief Financial Officer.
Mark Ordan, QCP's Chief Executive
Officer, said, "This agreement facilitates a consensual
resolution that provides stability and flexibility for the
business. We see this as the best available opportunity to improve
a challenging situation. We considered every possible option and
determined that entering this agreement to take direct ownership of
our tenant best positions QCP to reposition the business to realize
the potential of its properties for QCP shareholders. Under
Guy and Laura's leadership, HCR ManorCare will continue to support
the excellent employees providing long-term care, hospice and
rehabilitation services, and corporate services to enhance patient
care and drive referrals."
Mr. Ordan continued, "In the coming weeks and months, we will
work closely with HCR ManorCare senior management and the rest of
HCR ManorCare's management and operating team to ensure a smooth
transition. HCR ManorCare's team of skilled, dedicated and
compassionate employees will continue to be the ultimate driver of
the Company's superior patient care. We look forward
to completing this
transaction and to delivering long-term value
to employees, patients, residents and shareholders."
John R. Castellano, HCR
ManorCare's Chief Restructuring Officer, said, "We have invested a
significant amount of time and effort in developing this proposed
solution for all constituents involved. We believe that this
agreement is a positive outcome for all of HCR ManorCare's
stakeholders. Under our proposed plan, HCR ManorCare
employees and creditors, aside from QCP, will not be impaired while
we transition the ownership of the HCR ManorCare parent company to
QCP. This represents an important step forward to strengthen
the Company's financial position and create value."
Steven M. Cavanaugh, HCR
ManorCare's President and Chief Executive Officer, stated, "We have
worked with QCP to reach an agreement that provides stability
for our employees, residents and patients. I am proud of the
hard work and dedication that HCR ManorCare employees have
continued to demonstrate in delivering outstanding care during
difficult times. We will work tirelessly through the
transition to ensure that the company continues to deliver the same
level of outstanding care."
Transaction Structure and Terms
At the closing of the transaction, QCP's claims against HCR
ManorCare under the Master Lease and guaranty, including the
deferred rent obligation and unpaid rent, will be exchanged and
released for 100% equity ownership of HCR ManorCare, with HCR
ManorCare becoming a wholly-owned indirect subsidiary of QCP.
In connection with this transaction, QCP expects to no longer
qualify for status as a Real Estate Investment Trust (REIT).
No longer attempting to qualify as a REIT enables QCP to own the
operator of the skilled nursing and assisted living/memory care
facilities across its high quality asset base, as well as the
operator of HCR ManorCare's hospice business, Heartland Hospice and
Home Health Care ("Heartland"). Heartland is one of the top five
largest hospice companies in the United States.
Additional details regarding the Plan Sponsor Agreement and the
transactions contemplated by the Agreement will be made available
in the Company's filings with the Securities and Exchange
Commission. QCP expects to conduct an investor day in
approximately 60 days to provide an update on its strategy and
financial picture.
The controlling stockholders of HCR ManorCare have also signed a
restructuring support agreement in support of the transaction.
Concurrent with the signing of the Plan Sponsor Agreement, HCR
ManorCare made a rent payment to QCP of $23.5 million, which represents the $14 million and $9.5
million payments previously due on January 25 and February
10, 2018, respectively. QCP expects to receive rent
payments from HCR ManorCare during the Chapter 11 period in
accordance with the provisions of the Plan Sponsor
Agreement.
Advisors
Sullivan & Cromwell LLP and Paul, Weiss, Rifkind, Wharton
& Garrison LLP are serving as QCP's legal counsel, Lazard and
Houlihan Lokey Capital, Inc. are serving as financial advisors and
Alvarez & Marsal is serving as an advisor. Latham &
Watkins and Sidley Austin are
serving as HCR ManorCare's legal counsel, AP Services, LLC is
serving as restructuring advisor and Moelis & Company is
serving as financial advisor.
About QCP
Quality Care Properties, Inc. is one of the nation's largest
actively managed real estate companies focused on
post-acute/skilled nursing and memory care/assisted living
properties. QCP's properties are located in 29 states and include
257 post-acute/skilled nursing properties, 61 memory care/assisted
living properties, a surgical hospital and a medical office
building. For more information regarding QCP, visit
www.qcpcorp.com.
About HCR ManorCare
HCR ManorCare is a leading provider of short-term, post-hospital
services and long-term care with a network of more than 500 skilled
nursing and rehabilitation centers, memory care communities,
assisted living facilities, outpatient rehabilitation clinics, and
hospice and home health care agencies.
Safe Harbor Statement
Certain statements in this press release that are not historical
statements of fact may be deemed "forward-looking
statements." The Company and HCR ManorCare intend to have
their forward-looking statements covered by the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995
and include this statement for purposes of complying with those
provisions. Forward-looking statements include, among other
things, statements regarding the Company's or HCR ManorCare's
intent, belief or expectations. In particular, we note that
statements regarding the prepackaged plan of reorganization, the
events and transactions contemplated by the Plan Sponsor Agreement,
including HCR ManorCare's contemplated voluntary filing under
Chapter 11 of the United States Bankruptcy Code, are
forward-looking statements. No assurance can be given that
the Company will consummate the transactions with HCR ManorCare in
a timely manner or at all, that the terms of any such transactions
ultimately approved by the bankruptcy court will be favorable to
us, that the Company will succeed in transitioning leadership and
ownership in HCR ManorCare, in recapitalizing HCR ManorCare and in
providing stability and flexibility to better react to today's
rapidly changing post-acute care industry, that the Company will
continue to receive rent payments from HCR ManorCare during the
Chapter 11 period, or that HCR ManorCare will be able to
successfully exit its Chapter 11 bankruptcy. See "Risk Factors" in
the Company's most recent Annual Report on Form 10-K and its SEC
filings for extensive discussion regarding the risks to the Company
from its association with HCR ManorCare. These filings are
available on the Company's website at www.qcpcorp.com and at
www.sec.gov.
Forward-looking statements speak only as of the date of this
press release. Except as may be required under the federal
securities laws and the rules and regulations of the Securities and
Exchange Commission, the Company expressly disclaims any obligation
to release publicly any updates or revisions to any forward-looking
statements.
Contacts
For QCP:
Joele Frank, Wilkinson Brimmer
Katcher
Andrew Brimmer / Kelly Sullivan / Aaron
Palash
(212) 355-4449
For HCR ManorCare:
Erick Mullen
emullen@mercuryllc.com
(202) 261-4000
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SOURCE Quality Care Properties, Inc.