HILO — Legacy Hilo Rehabilitation and Nursing Center filed for Chapter 11 bankruptcy and entered into a contract to sell the facility to Hilo SNF.
According to a press release Monday, the purchase contract provides Legacy Hilo with a binding bid of $17.5 million, which is subject to higher offers from qualified bidders.
Hilo SNF, which manages Legacy Hilo, is owned by Oahu-based Ohana Pacific Management Co.
According to court documents filed Sunday by Kaumana Drive Partners doing business as Legacy Hilo, there are outstanding loans from Seattle-based lender CPIF WTB LLC of $13.9 million. The facility has not paid CPIF since May.
Legacy Hilo’s revenues totaled about $10 million in 2018, but expenses for the year exceeded $11 million.
That includes $1 million in legal fees associated with a lawsuit brought by investors against Regency Venture Fund, a Hawaii limited liability limited partnership that owns Legacy Hilo.
The documents also say the investor lawsuit prevented the refinancing of the CPIF loans.
As of Oct. 6, Legacy Hilo had nearly $306,000 in cash and approximately $2.1 million in receivables.
According to the court documents, the facility also owes an estimated $1.6 million in delinquent general excise taxes to the state, and there also are approximately $2 million in unsecured debts, some of which are in dispute.
Revenues were approximately $6.8 million through September of this year.
In February, Legacy Hilo received an unsolicited offer from Avalon Health Care Group to purchase the facility, state court documents. It engaged a bankruptcy lawyer and reached an agreement on terms of a sale, but Avalon terminated negotiations in late June.
Shortly thereafter, the nursing facility began negotiations for the sale with Hilo SNF, the documents state.
Chuck Choi, a Honolulu-based attorney representing Legacy Hilo, said oftentimes buyers will ask that a sale be done through Chapter 11 bankruptcy proceedings.
On Monday, a wage motion was approved, he said, explaining that a court order was needed to pay existing obligations such as payroll.
Next, Choi said he will ask the court to approve bid procedures of a potential auction of the facility if a qualified bid is submitted.
“If no qualified bid is made, then we anticipated the court will approve the sale of the facility to the buyer,” he said.
“The debtor is doing everything it can to make sure that the sale closes this year.”
Legacy Hilo President Ben Meeker and Hilo SNF said in the joint press release that the bankruptcy filing will not have an adverse impact on operations or employees, and that the facility “will continue to provide excellent care to its patients.”
Meeker said there is sufficient cash to ensure the payment of all essential operating obligations, including payment of employees and vendors.
The 48,597-square-foot Legacy Hilo facility was completed in 2015 and has a certification from the Centers for Medicare and Medicaid Services. Meeker said the sale won’t affect that certification.
Hilo Legacy is a 100-bed facility that currently has 74 patients, court documents said. There are approximately 120 employees.
Ohana Pacific Management Co. owns and operates five skilled nursing facilities, two adult day health centers, a home health agency and a management company in Hawaii, with a total of 509 beds on Oahu and Kauai.
Email Stephanie Salmons at ssalmons@hawaiitribune-herald.com.
