Assisting a Lender Reduce its Loan Exposure

Peterson Healthcare

Peoria, Illinois

Challenge

120 location, 6,400 bed Assisted Living Centers. $200 million annual revenues. $190 million in debt.


  • Illinois budget problems resulted in Medicare reimbursements being cut off state-wide
  • 35% of company receipts aging past 120 days with no indication of timing on resumption of payments from the state
  • Facing tremendous budget shortfalls, Illinois limited Medicare reimbursements and extended payments 120-150 days
  • AR was growing over $1 million each month and AP was being stretched a similar amount to maintain liquidity
  • Company was being run in 13 different silos representing various acquisitions. Fragmented corporate structure; intercompany transfers involved due to/due from the controlling shareholder
  • Certain silos paying AP down to near zero days, others extending credit past 120 days. No coherent management strategy to address situation

Solution

  • MorrisAnderson was hired by bank group to review collateral situation and assess company’s management and their plans to address issues
  • Analysis identified additional personal collateral of controlling shareholder
  • Reviewed overall company financial situation; regarding refinancing options, collateral valuations and cash flow of operations
  • Prepared assessment of bank documents, collateral positions and developed options for bank group as part of refinancing process

Results

  • Bank exposure reduced from $25 million to $5 million as part of refinancing
  • Additional collateral from primary shareholder identified, turned into cash and used to provide liquidity for entities
  • MorrisAndersonstill providing quarterly monitoring for bank group to ensure compliance with covenants and to identify ongoing operational issues

Mark J. Welch

Mark J. Welch, CPA, CTP is a Principal at MorrisAnderson based in Pittsburgh. He has over 20 years in bankruptcy and restructuring experience especially in leadership roles and fiduciary positions with clients. Prior to joining MorrisAnderson, Mark was the Director of Internal Audit at Southern Air Transport, Inc., a mid-sized cargo air-transport airline. He also… Read More