Deer Meadows Retirement Community in Northeast Philadelphia, which filed for bankruptcy protection last month, is on track for a sale or reorganization that will allow it to keep operating, the nonprofit's chief executive, Lisa Sofia, said Monday.
"The ultimate goal is for Deer Meadows to stay open, which it will," said Sofia, who assumed leadership of Deer Meadows in November 2011. That is when the continuing-care retirement community last made a bond payment.
Deer Meadows, which has 491 residents and employs 369 workers, took on $28.38 million in bond debt in 1998 to build a new nursing home with space for 135 beds and then renovate the former nursing-home space into 78 personal-care units, bond offering documents said.
The debt was too large for Deer Meadows as the economy tanked and reimbursements either fell or stalled.
Bondholders did not accept a debt-relief proposal in June 2012. A June 2013 debt restructuring proposal had received no response as of October, when Deer Meadows' financial audit for fiscal 2013 was completed.
Deer Meadows has missed $5.12 million in principal and interest payments, according to the trustee for the bonds.
Between 2003 and 2008, Deer Meadows, which was founded in 1869 and was formerly known as the Baptist Home of Philadelphia, spent $7 million reconfiguring apartments to make them larger.
In addition to its heavy load of bond debt, Deer Meadows has two Beneficial Bank lines of credit with a total capacity of $8.13 million, according to Sofia's declaration explaining the reason for the April 25 bankruptcy.
The larger of those two notes matures Aug. 1 with a balloon payment of $5.52 million due then.
"Despite the home remaining current on its obligations to Beneficial, Beneficial has threatened to liquidate its collateral," Sofia said in the filing.
"Beneficial also has advised the debtors that the loans will not be extended or renewed upon expiration," the filing said.
Under Sofia's predecessor, Deer Meadows, which has had annual operating losses dating back to at least 2008, hired financial advisers to restructure its debt. The firm's advice was to file for bankruptcy.
The idea was to somehow force creditors to accept significantly less than they were owed in what is called a "cramdown."
"When I took over, that was not what I wanted to do," Sofia said.
BY THE NUMBERS
Residents at Deer Meadows.
Bond debt that it took on in 1998 to build a new nursing home and also to renovate the former nursing-home space into personal-care units.