DLA Piper represented 4 West Holdings, Inc., Orianna Health Systems, and various affiliates in their voluntary chapter 11 cases in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. The Debtors’ chapter 11 plan was confirmed by Judge Harlin DeWayne Hale following a hearing on January 8.
Orianna owned and operated 42 skilled nursing facilities located in seven states, and also owned a hospice care services company providing hospice and palliative care services at various facilities. Prior to the filing, Orianna’s facilities included approximately 4,000 residents, and they employed approximately 5,000 employees.
Prior to Orianna’s bankruptcy filing in March 2018, a deal with the largest secured creditor, Omega Healthcare Investors, Inc. (NYSE: OHI), was negotiated by which the Debtors would (a) sell half of their real estate portfolio for approximately US$225 million, and (b) transfer the other half of their portfolio to designees of Omega, the value of which was later determined to be US$190 million, pursuant to a settlement agreement and in exchange for which Omega was to support the Debtors’ plan.
In July 2018, a dispute arose among the parties that threatened the feasibility of the plan. This development then led to Omega seeking a termination of the restructuring support agreement and triggering a default under its debtor in possession financing.
Rather than scrap the plan or otherwise concede to Omega’s threats to convert the cases to chapter 7, the Debtors instead took certain key steps toward ensuring that the fundamentals of the plan could remain in place. In a novel move, the DLA Piper team filed a motion under Federal Bankruptcy Rule 3019 to bind Omega to its prior acceptance of the plan. The motion argued that Omega’s treatment under a modified plan was not materially and adversely impacted because the consideration it previously received under the settlement agreement was not properly credited to its claim after it no longer supported the plan. The Bankruptcy Court held a contested evidentiary hearing in late October, and several weeks later, published a written decision granting the 3019 motion and binding Omega to accept the modified plan. The 3019 decision paved the way for final approval of the plan, which also required Omega to provide US$7.4 million toward payment of general unsecured creditors.
The DLA Piper team was led by US co-Chair of the Restructuring practice Thomas Califano (New York) and partner Daniel Simon (Atlanta); and included partner Shmuel Klahr (New York); and associates David Avraham (Chicago), Dienna Corrado (New York), and Andy Zollinger and Crystal Jamison Woods (both Dallas).
About DLA Piper’s Restructuring Practice DLA Piper's dedicated US restructuring lawyers address our clients’ needs whenever and wherever they arise on a timely, cost-effective basis. With lawyers in offices throughout the US, our team has in-depth experience representing and advising companies experiencing financing difficulties, purchasers of and investors in distressed companies, and lenders to and creditors of such companies on complex business reorganizations, troubled company M&A, debt restructurings and financing matters.
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