Five years after filing for Chapter 11 protection from creditors, West Toledo Healthcare & Rehabilitation Center exited bankruptcy last month.
But nobody at the nursing home at 4645 Lewis Ave. was cheering. Its nearly two-decade long financial struggle was about to get more complicated.
After the owner, the nonprofit Benchmark Healthcare of Toledo Inc., was unable to implement a plan of reorganization, the bankruptcy case was dismissed on July 23 and creditors swooped in.
Now a court-appointed receiver has taken charge of the struggling facility with the assignment to get it in shape for a sale to repay more than $5.7 million it owes on bonds issued by Lucas County 11 years ago.
"The bank asked us to take it over and try to get it back in good shape so it is making money again," said David Tenwick, chairman of AdCare Health Care Systems Inc. in Springfield, Ohio.
"It has the possibility of getting back on its feet."
Lucas County Judge Gary Cook on Aug. 5 appointed the firm receiver of the nursing home at the request of Huntington National Bank, which is trustee for bondholders. Huntington has filed for foreclosure, seeking $11.4 million.
AdCare has sent notices to vendors and is developing a turnaround plan for the facility, opened in 1965.
"I've spent a good part of the day talking to people and getting them to understand where the situation is," Mr. Tenwick said Friday. AdCare will be paid 7 percent of revenues from the nursing home for acting as receiver and providing management services.
AdCare, stock of which is traded on the American Stock Exchange, manages about two dozen nursing homes and retirement communities in Ohio.
The firm has its work cut out for it. West Toledo Healthcare was home to 224 elderly and ill people as recently as 1995. It is down to just 47 residents, although current capacity is nearly double that.
Financial problems, which started as early as 1993, have taken the nursing home on a strange odyssey that has included ownership by a pair of obscure nonprofit organizations in the deep South, a long bankruptcy case heard not in Toledo but Chattanooga, Tenn., and neglected maintenance.
Built by local nursing home entrepreneur J. Edward Spencer, the home known as Spencer Manor and later Villa North was sold in 1988 to Gericare Inc. of Little Rock, Ark.
That is when its problems seemed to begin. A few years after buying the home, Gericare defaulted on its debts and was placed in receivership, according to bankruptcy court filings.
The nonprofit Foundation for the Elderly Inc. took over in 1993. To raise money to pay off bonds sold in 1988 for the purchase and renovation of the facility, Lucas County worked with the new owners on a $6.6 million bond offering in 1998.
In case the nursing home defaulted, taxpayers weren't on the hook. Under terms of the revenue bonds, only cash generated by the facility had to be used for re-payment, said John Zeitler, Lucas County budget director.
That was fortunate for taxpayers. West Toledo Healthcare stopped making interest payments in 2003, five years after the bonds were sold.
Owner Benchmark Health Care, which was set up by owners as an Ohio nonprofit corporation, filed for Chapter 11 bankruptcy in May, 2004. For fiscal 2003, the home lost $1.6 million on $6.8 million in revenues. The case was filed in U.S. Bankruptcy Court in Chattanooga, Tenn.
That was the home base of another nonprofit that took over operations from the Foundation for the Elderly in late 2003 after the nursing home stopped making interest payments. The Trousdale Foundation, headed by nursing home consultant Thomas D. Johnson, is based in Cleveland, Tenn. Mr. Johnson could not be reached for comment.
The Toledo nursing home last year made $263,000 in payments for management fees on top of $203,000 for administrative salaries, IRS documents show. They don't say who received the management fees.
Lawyers for Huntington Bank, which is trying to recover its loan, have stated that proceeds from any sale of the nursing home may be insufficient to cover its debts.
Court documents state that most of the home's revenues come from federal and state Medicare and Medicaid payments
During the long financial turmoil, the building has been allowed to deteriorate somewhat, the AdCare chairman said.
Care does not seem compromised. In its most recent inspection by the Ohio Department of Health, last December, the facility met 98.8 percent of standards, compared to an average of 94 percent for nursing homes statewide.
Contact Gary Pakulski at:
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