In a move that is not too surprising, Erickson Retirement Communities agreed to be sold to Redwood Capital Investments LLC for an undisclosed price, and simultaneously the company filed for Chapter 11 bankruptcy protection, listing more than $1.0 billion in liabilities and more than $1.0 billion in assets. Redwood is controlled by Jim Davis, who also owns Allegis Group, a private staffing company with more than $4.0 billion in revenues. Mr. Davis is also a friend of John Erickson, the company’s founder.
Erickson Retirement Agrees To A Sale
October 22, 2009
What assets are exactly included in the sale remains unclear at this point, but the stabilized CCRCs that had been previously sold to not-for-profit entities who in turn hired Erickson Retirement Communitie to manage them, are not included (although the management agreements obviously would be included). This is the stalking horse bid that we referred to in the October issue of The SeniorCare Investor, and we heard that the number was $100 million in cash, which is obviously less than what they want. Mr. Davis’ name had been thrown about in recent months, but we don’t know why he would really want to entangle himself in this situation, other than to help out a friend. The Chapter 11 filing will result in pressure on the lenders to take a bit of a haircut on their debt, but how much is hard to tell. Some distressed debt buyers may already own some of the debt, and others may be buying more, at bigger discounts, so they may not be too receptive to overtures for principal reductions. The ubiquitous Alvarez & Marsal has been hired as a restrucutring advisor to Erickson, and Houlihan, Lokey was retained as the investment and financial consultant.