Genesis Healthcare, Inc. (“Genesis” or the “Company”)
(NYSE:
GEN) announced today a three-part
strategic restructuring plan to strengthen the Company’s liquidity
position and capital structure as it charts a path to recovery.
First, Genesis has agreed to terminate its master lease covering
51 facilities leased from affiliates of Welltower Inc.
(“Welltower”) and transition operations to new operators. In
return, Genesis will receive approximately $86 million, which it
will use to repay a portion of its debt obligations to Welltower.
In addition, Genesis will receive approximately an additional $170
million in debt reduction from Welltower upon the occurrence of
certain conditions, including the transition of the 51
facilities.
Second, Genesis entered into a definitive agreement with ReGen
Healthcare, LLC (“ReGen Healthcare”) for a capital infusion of $50
million. Third, the Company will voluntarily delist its Class A
common stock (the “Common Stock”) from the New York Stock Exchange
and deregister its Common Stock under the Securities Exchange Act
of 1934 (the “Exchange Act”).
“The severity of the pandemic dramatically impacted patient
admissions, revenues and costs, compounding the pressures of our
long-term, lease-related debt obligations,” said Chief Executive
Officer Robert Fish. “These restructuring transactions improve the
financial and operational stability of the Company significantly
and build on the encouraging signs we are seeing as COVID-19 case
rates continue to materially decline and residents, patients and
staff are vaccinated.”
Transition out of 51
facilities leased from Welltower Genesis currently
leases 246 skilled nursing and assisted/senior living facilities
from third parties, including public and private real estate
investment trusts (“REITs”). One of the Company’s largest
landlords, Welltower, will re-tenant and/or sell the 51 facilities
it leases to Genesis affiliates, in 9 states. Genesis will continue
to operate the facilities until appropriate approvals from state
regulators are completed. The transitions are expected to occur
over the next several months.
Currently, Genesis is also indebted to Welltower in an
approximate amount of $423 million. In return for its
agreement to terminate its master lease with Welltower, upon the
transition of the operations of all 51 facilities, Genesis will
receive approximately $86 million, which it will use to repay a
portion of its debt obligations to Welltower. In addition, the
Company will receive approximately $170 million in additional debt
reductions from Welltower upon the satisfaction of certain
conditions, including the transitioning of all 51 facilities. As a
result, in total, Genesis expects to reduce its debt outstanding to
Welltower, by approximately $256 million and extend maturity to
January 1, 2024. Welltower will also permit certain collateral to
be released and utilized as collateral for new debt.
Prior to the COVID-19 pandemic, these 51 facilities generated on
a combined basis approximate annual net revenue of $640 million.
This transaction will result in the reduction of $79 million in
annual cash lease expenses. Welltower will also receive equity in
the Company, increasing its stake in Genesis on a fully-diluted
basis from approximately 6% to up to approximately 15%.
Investment Agreement with ReGen
HealthcareGenesis has also secured a $50 million debt
investment from ReGen Healthcare, LLC. This debt investment
converts into equity representing a 25% ownership interest in the
Company’s subsidiaries on a fully-diluted basis, contingent upon
both the receipt of all required regulatory approvals and the
reduction of indebtedness owed by the Company to Welltower.
ReGen Healthcare also has the option to make an additional debt
investment of $25 million exercisable no later than March 31, 2021
and to be funded by April 15, 2021. If made, this debt investment
will convert into equity simultaneously with the conversion of the
initial debt investment into equity, resulting in a 33.3% ownership
interest in the Company’s subsidiaries on a fully-diluted basis. In
addition, at the closing of the second investment, ReGen Healthcare
would be issued a warrant, exercisable for equity, which, together
with the two debt investments, would represent an ownership
interest of approximately 43% of the Company’s subsidiaries on a
fully-diluted basis.
ReGen Healthcare, together with its affiliates and its
principals, has a track record of successfully creating and turning
around companies that improve both healthcare delivery and
insurance processes for health plans, their members, and their
provider partners. One of these affiliates, Pinta Capital Partners,
has invested widely in innovative services for the chronically ill
and applied new practices in services to one of the neediest,
frailest and most vulnerable populations. As part of the agreement,
two Genesis Board Members, John F. DePodesta and Terry Rappuhn,
have relinquished their current positions and ReGen Healthcare has
appointed Mr. David Harrington and Mr. John Randazzo, effective
immediately. In addition, Mr. Harrington has been appointed
Chairman of the Board. “The Company thanks Mr. DePodesta and Ms.
Rappuhn for their service and dedication throughout their
respective tenures,” said Robert Fish “Genesis welcomes Mr.
Harrington and Mr. Randazzo on our Board of Directors and will
benefit greatly from their deep and diversified experience in
healthcare delivery management, healthcare sector financial
expertise and entrepreneurial acumen.”
Mr. Harrington brings 35 years of industry experience in
critical areas of healthcare delivery management to the Board. He
has held executive positions at AETNA, UnitedHealthcare,
Columbia/HCA and Physician Quality Care. As CEO of American Imaging
Management (“AIM”) from 2001 to 2008, Mr. Harrington turned around
this radiology management business, increasing its net worth from
negative $19 million to over $350 million. In August 2007, AIM was
sold to WellPoint for $307 million. Since 2009, when Mr. Harrington
established DASH Business Group, he has advised and developed many
healthcare companies in the senior care space. Mr. Harrington is
one of the founding principals of Pinta Partners and in that role
is passionate about rethinking the delivery of health care to the
chronically ill.
Mr. Randazzo has spent more than 35 years in the health care and
technology fields and brings rich experience in operational
excellence, corporate finance and entrepreneurship. He is currently
Executive Chairman of Waters Edge Dermatology, one of the largest
dermatology practices in the country, and Executive Chairman of
Sentry Data Systems, a provider of pharmacy technology solutions to
hospitals. Mr. Randazzo previously co-founded and led one of
the nation’s largest independent urgent care companies, FastMed. He
has held executive positions at Value Oncology Science, Women's
Health Connecticut Inc. and CIGNA. Mr. Randazzo has served as a
senior advisor to global private equity firm, Warburg Pincus, for
over 20 years.
Delisting from the NYSE and Deregistration under the
Exchange ActIn connection with the investment by ReGen
Healthcare, Genesis has agreed and intends to voluntarily delist
its Common Stock from the New York Stock Exchange. Additionally,
the Company has agreed and intends to deregister its Common Stock
under the Exchange Act and suspend its public reporting
obligations.
The Company intends to file a Form 25 with the Securities and
Exchange Commission (the “SEC”) on or about March 15, 2021 in order
to delist from the New York Stock Exchange. The Company anticipates
that the last day of trading on New York Stock Exchange will be on
or about March 25, 2021.
On or about March 25, 2021, the Company intends to file a Form
15 with the SEC, at which time the Company anticipates that its
obligations to file periodic reports under the Exchange Act,
including annual, quarterly and current reports on Form 10-K, Form
10-Q and Form 8-K, respectively, will be suspended, and that all
requirements associated with being an Exchange Act-registered
company, including the requirement to file current and periodic
reports, will terminate 90 days thereafter.
Following the deregistration, the Company anticipates that its
Common Stock will be quoted on the OTC Pink Open Market (the “Pink
Sheets”), a centralized electronic quotation service for
over-the-counter securities, so long as market makers demonstrate
an interest in trading in the Common Stock. However, the Company
can give no assurance that trading in its Common Stock will
continue on the Pink Sheets or any other securities exchange or
quotation medium.
The Company expects to file its 2020 Form 10-K by March 16,
2021, but it will not distribute a Q4 2020 earnings release or host
a conference call.
States impacted by the transitionsThe 51
skilled nursing and assisted/senior living facilities leased from
Welltower that will be transitioned are located in the states of
Colorado (4), Connecticut (4), Delaware (3), Kentucky (5), Maryland
(6), New Hampshire (3), New Jersey (17), Pennsylvania (7) and West
Virginia (2). About Genesis HealthCareGenesis
HealthCare is a holding company with subsidiaries that, on a
combined basis, provides services to more than 325 skilled nursing
facilities and assisted/senior living communities in 24 states
nationwide. Genesis subsidiaries also supply rehabilitation therapy
to approximately 1,100 healthcare providers in 44 states, the
District of Columbia and China. References made in this
release to "Genesis," "the Company," "we," "us" and "our" refer to
Genesis Healthcare, Inc. and each of its wholly-owned companies.
Visit our website at www.genesishcc.com.
Genesis HealthCare Contact:Investor
Relations610-925-2000
Forward Looking StatementsCertain statements in this release
constitute “forward-looking statements” within the meaning of the
federal securities laws, including the Private Securities
Litigation Reform Act of 1995. You can identify these statements by
the fact that they do not relate strictly to historical or current
facts. They contain words such as “may,” “will,” “project,”
“might,” “expect,” “believe,” “anticipate,” “could,” “would,”
“estimate,” “continue,” “pursue,” “plans,” or “prospect,” or the
negative or other variations thereof or comparable terminology. All
statements contained in this release that do not relate to matters
of historical facts should be considered forward-looking
statements, including statements about (i) our ability to delist
the Class A Shares from the NYSE; (ii) our ability to deregister
the Class A Shares and suspend reporting obligations under the
Exchange Act; (iii) estimates regarding the timing of the delisting
and deregistration of Class A Shares; (iv) statements about the
Second Closing which may or may not occur; and (v) statements about
the Welltower transition of operations which may or may not occur.
Investors are cautioned that forward-looking statements are not
guarantees of future performance or results and involve risks and
uncertainties that cannot be predicted or quantified and,
consequently, the actual performance of Genesis may differ
materially from that expressed or implied by such forward-looking
statements.
Investors and readers are cautioned not to place undue reliance
on these forward-looking statements, which are based on the
Company’s expectations as of the date of this release and speak
only as of the date of this release and are advised to consider the
factors listed under the headings “Forward-Looking Statements” and
“Risk Factors” in the Company’s filings with the SEC, including the
Annual Report on Form 10-K for the year ended December 31, 2019.
Genesis disclaims any obligation to update its forward-looking
statements or any of the information contained in this release
except as required by law.
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