Amsterdam at Harborside files bankruptcy with pre-negotiated plan

By Sarah Lizee

Olympia, Wash., June 15 – Amsterdam House Continuing Care Retirement Community, Inc., which does business as the Amsterdam at Harborside, filed Chapter 11 bankruptcy on Monday in the U.S. Bankruptcy Court for the Eastern District of New York to implement a balance sheet restructuring and bond financing through a pre-negotiated Chapter 11 plan, according to court documents.

The plan was negotiated at arm’s length between the debtor, its sole member, which is Amsterdam Continuing Care Health System, Inc., the trustee to the debtor’s outstanding series 2014 revenue bonds issued by the Nassau County Industrial Development Agency and holders of about 73% of the bonds.

“The Harborside has faced historic financial challenges, the effect of which threatens the debtor’s ability to honor its long-term debt obligations and maintain its operational stability,” James Davis, president and chief executive officer of Amsterdam Continuing Care Health System, said in a declaration.

Davis said the debtor’s inability to attract new residents and the burden of statutory requirements regarding the repayment of refunds caused a severe liquidity crisis for the debtor even before the impact of the Covid-19 pandemic.

“The pandemic exacerbated these problems,” Davis said.

To preserve liquidity during the Covid-19 pandemic, the debtor ceased making payments on the 2014 series bonds and ceased making payments of resident entrance fee refunds.

The failure to make refund payments caused the debtor to fall out of compliance with the terms of its residency agreements, which requires payment of entrance fee refunds no later than 30 days after the formerly occupied unit has been resold and in no event later than one year after the formerly-occupied unit has been vacated.

The debtor intends for the Chapter 11 process to minimize any business disruption and impact on the debtor’s daily operation of its Harborside community or on its residents, general unsecured creditors and vendors, among others.

The debtor reported non-compliance to Department of Health, which issued a citation for non-payment of nine refunds at a total amount of $5.2 million, which it later updated with an addendum to a total of 19 entrance fee refunds totaling about $12 million. Currently, 33 refunds at a total of $20.3 million are unpaid.

Restructuring terms

The restructuring will consist of the funding of an additional $40.71 million in new money series 2021A bonds to provide for the payment of all outstanding entrance fee refunds in full; partial funding of the debtor’s minimum liquid reserve requirements under applicable New York State law; and a necessary debt service reserve fund.

It will also provide for the contribution of $9 million from Amsterdam Continuing Care Health System to the debtor to fund the balance of the minimum liquid reserve requirements.

Additionally, the debtor’s current series A and B bonds will be exchanged for a pro rata share of $127.33 million of new 2021B bonds.

The debtor will also enter into a liquidity support agreement, under which the member’s obligations will be fully funded from the closing of the sale of a not-for-profit nursing home operated by an affiliate of the debtor and member, to be dedicated to regulatory compliance, including the funding of future minimum liquid reserve requirements and entrance fee refund obligations. The funds will be held in a segregated account at the debtor and will not be subject to trustee liens.

Creditor treatment

According to the disclosure statement, holders of administrative expense claims, accrued professional compensation claims, priority tax claims and other priority claims will be paid in full.

Holders of other secured claims will receive cash equal to their claims or other treatment that leaves their claims unimpaired.

Holders of series 2014A and series 2014B bonds claims will receive, in exchange for their existing bonds, a pro rata share of the series 2021B bonds.

The series 2014C bonds will be canceled in whole without any payment of or consideration.

Holders of general unsecured claims will receive an amount equal to 15% of their claims.

Holders of resident refund claims will receive payment in full but without interest.

Intercompany claims will be extinguished with no distribution.

Interests will be reinstated and holders will retain their interests.

Debt details

In its petition, the debtor listed $100 million to $500 million in both assets and liabilities.

Six of its largest unsecured creditors are listed as residents, with entrance fee liability claims ranging from $1.09 million to $1.36 million. Its fifth largest unsecured creditor is the United States Small Business Administration, based in Washington, D.C., with a $1.16 million paycheck protection program loan.

The Port Washington, N.Y.-based senior living community builder and operator filed bankruptcy under Chapter 11 number 21-71095.

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