Shareholders Get Home Operator
By MICHAEL THURESSON
Fountain View Inc., the Burbank-based nursing home operator that filed for Chapter 11 bankruptcy protection in September 2001, has filed a plan to emerge from court supervision and pay off all its creditors.
In an unusual outcome, the company will remain in the hands of its shareholders, according to the reorganization plan it filed with in federal Bankruptcy Court last week.
Typically, creditors in Chapter 11 proceedings cannot be fully paid off, so they end up taking partial or full ownership of the company in exchange for the debt they are owed.
In the Fountain View proceeding, shareholders will receive substantially all of the equity of the reorganized company, the company said in a statement. Fountain View has received commitments for an additional $150 million in financing.
Fountain View, which recently moved to Foothill Ranch, got into financial trouble in 2001. That year, the company was hit with a hike in liability insurance rates, a Medicare dispute with federal regulators, and a $6.1 million judgment resulting from the death of a resident at one of its homes.
While operating under bankruptcy court protection, the company received a $3.1 million settlement from the federal government related to the prior closing of a facility over the Medicare dispute.
It also settled the patient death case for $1.1 million, which was paid by one of its insurance companies, said Michael Tuchin, a co-manager at Klee Tuchin Bogdanoff & Stern LLP, a Los Angeles-based bankruptcy law firm working with Fountain View.
Robert Snukal, Fountain View’s founder, was replaced last year by its current chief executive, Boyd Hendrickson. The Snukal family was criticized for its business ties with Fountain View and for family members’ employment there in high positions.
Hendrickson, a former executive with industry giant Beverly Enterprises Inc., cited improved efficiency within the operation as one reason Fountain View was plans to emerge from bankruptcy intact. The company has reduced overhead by $3 million to $4 million, since he arrived in April 2002, he said.
Hendrickson was joined by another Beverly Enterprises alumnus, Jose Lynch, who is now president of Fountain View’s Texas operations.
While the company’s plans to emerge from Chapter 11 status are in place, its legal troubles are not over. The firm that filed the wrongful death case against Fountain View, Wilkes & McHugh, has 11 other plaintiffs with cases filed against Fountain View, according to firm spokesman Steve Vancore.