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ETT Message Board

  • lorddismay lorddismay Jun 23, 2000 8:07 PM Flag

    Will GHV bankruptcy affect litigation?

    Since GHV is bankrupt, how will this affect lawsuits pending against GHV? Will attorneys representing clients suing GHV be able to recover legal fees? Just wondering.

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    • Every industry insider I've ever heard says you
      can't do per bed valuations. Too much state-to-state
      variation based on licensing issues, etc.

      That said,
      I feel ETT's "intrinsic" value is extremely hard to
      determine due to the complicated nature of its holdings. It
      may well be negative.

    • <<June 16 Merrill Lynch comment on
      Eldertrust included the following - ETT's NAV is a negative
      46.6 million. Came to this conclusion by assuming
      nursing homes in the current environment sell for $30,000
      per bed and ALF's at $60,000 per bed. >>
      Thanks. I was aware of ML #'s but seeking to verify or
      refute as this represents about a 50% haircut. Obviously
      REIT'S and operators have had that much and more taken
      off, but that reflects excess leverage rather than
      non-leveraged value of the land-building-business that makes up
      a nursing home. Any other data on per bed values
      would be welcome.
      Thanks again.
      bob

    • June 16 Merrill Lynch comment on Eldertrust
      included the following - ETT's NAV is a negative 46.6
      million. Came to this conclusion by assuming nursing homes
      in the current environment sell for $30,000 per bed
      and ALF's at $60,000 per bed.

      Hope this
      helps.

    • Since the Fall of last year roughly 2000 nursing
      homes have come under bankruptcy: about 12% of the
      nations total. Most of the non-bankrupt facilities are
      also hurting badly.
      Looking at census projections,
      to cover demand from growth in the over 75
      population from 2000 to 2005, it will be necessary to keep
      those facilities in service and construct an additional
      1700 new facilities.
      Since roughly 2/3's of this
      demand will be supported by gov't programs, Medicare,
      medicaid, etc, and the gov't has shown itself to be a
      totally unreliable 'partner', will investors step up to
      the plate to provide risk capital [6=>10 $B] for
      construction of those facilities?
      I know one that won't.

    • That will be dificult to determine because of the different geographical regions of the country. In the Southwest beds are half what they are in Pennsylvania or Michigan.

      Best, Oppo.

    • Just what is a 'bed' worth at a SNF or
      ALF?
      ETT is a group of assets and a chunk of debt. The
      debt is easy. But what are those homes worth in
      today's market - not fire-sale court-house steps, but
      sold the way you would your house over a reasonable
      time frame. Hint ETT book is around $71/bed on SNF's
      and $118/be on ALF's
      [both in thousands,
      SNF=Skilled Nursing Facility ALF=Assisted Living Facility]I'd
      expect it to be less, but how much less?
      This isn't a
      riddle where I know the answer, this is something we
      need to figure out in considering if there's
      substantial margin of safety with ETT.

    • In a prior post I stated <<An important
      distinction here is that the lease contracts are master
      leases, covering groups of homes, rather than one lease
      per home. This means that GHV can't individually
      cherry-pick or selectively prune the worst performing homes,
      but must go or pass on 'chunks' of homes. Were it
      otherwise, ETT would get stuck with the dregs with little
      hope or profitably re-leasing or selling at reasonable
      prices.
      I would doubt there's much difference in the
      average performance of these master leased groups, that
      would encourage to GHV to bail on the
      contracts.>> Well, almost, but not quite. According to Lee the
      GHV contracts are not master leases but are cross
      defaulted, within groups of leases
      executed at the same
      time, as to payment defaults. While this is not quite
      as strong as a master lease, it nevertheless
      presumabley helps prevent selective pruning. Lee also
      confirmed my impression that lease coverage at the
      individual property level is generally positive - that is,
      that if the facility were run as a stand alone
      business there would be enough revenue to cover normal
      expenses and pay the rent. This would be important if
      releasing were necessary.

    • Litagation is not affected by BK ... just the
      collection of awards, if any.

      DIP gets first ...
      after that the BK judge decides pecking orders although
      standard IMO is:

      1) bonds; 2) preferrred; c) common
      with settlements/awards coming somewhere inbetween
      1-3.

      BK never seems to stop the attorneys from suing for
      damages.

      • 1 Reply to secbubba
      • "DIP gets first ... after that the BK judge
        decides pecking orders although standard IMO
        is:

        1) bonds; 2) preferrred; c) common with
        settlements/awards coming somewhere inbetween 1-3."
        Nope: Dip &
        Bk lawyers & expense, then accepted contracts [ETT's
        leases], Secured loans [ETT's mortages], wage & benefit
        claims, consumer deposits, tax claims, then trade claims
        [I think civil suit settlements may be here],
        unsecured Bonds, Preferred & common, in that
        order.
        There will be period of uncertainty while plan is
        drawn, submitted and approved to determine if ETT's
        leases are accepted.
        We had an extended discussion
        of what if's on bankruptcy on the board earlier.
        Might be worth a revisit.
        bob

 

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