Judge approves management agreement in North Shore bankruptcy

LOVELAND — The court that is hearing the North Shore Manor nursing home bankruptcy case has approved a management agreement and permitted the operators of the facility to continue to use cash collateral for operations until at least May 18.

The court also denied an emergency motion from the facility’s primary creditor, Columbine Management Services, to appoint a Chapter 11 trustee to run the facility; instead, Judge Joseph Rosania Jr. accepted a proposed management agreement between North Shore Manor Inc. and QP Health Care Services LLC, which does business as Vivage Senior Living, to replace Columbine Management Services. 

The North Shore case, filed in early March, is an attempt by the majority owners of the real estate and the nursing home to wrest control of the operation located at 1365 W. 29th St. from Columbine Health Systems and Columbine Management Services. 

In numerous filings, attorneys for North Shore and for Columbine have flung barbed arrows, with Columbine saying that North Shore’s financial problems resulted from the failure of its majority owners to recapitalize the operation, and majority owners alleging that Columbine Management’s control of tethered vendors has resulted in cash-flow woes.

The parties have agreed that they want to part ways; the questions have been how to get there.

Prior to Tuesday’s hearing, North Shore reached a tentative agreement with a management company to replace Columbine. Columbine didn’t object to the management agreement but said other parties that North Shore had hired created redundancy and, as a result, stripped cash from the operation. 

The judge, however, approved the management agreement and ordered the parties to abide by the terms as presented.

The original reason for the Tuesday hearing was for the court to hear an update on the financial operations of the nursing home operation.

In a report filed April 21, North Shore Manor reported March receipts of $864,273 and disbursements of $796,528 for a net cash flow of $67,745. The operation had $332,798 on account prior to the month, making the new cash balance $400,543.

Employee count for the facility has dropped by six since the filing of the bankruptcy and stands now at 165.

Cash-flow performance exceeded the projections by $73,326, North Shore reported. It projected net cash flow of $114,321 for April.

North Shore also, in a motion filed Monday, told the judge that the majority owners are prepared to discharge a $393,548 secured claim held by Wapello Holdings II, a company affiliated with Columbine and its owner, J. Robert Wilson.

“The owners of the debtor have determined it would be best to purchase or provide a loan to the debtor to pay off the secured claim asserted by WHII …,” North Shore’s attorney wrote. “Since WHII has not consented to the sale of the note, the owners of the debtor are proceeding with a loan to the debtor … (and) will take the place of the WHII as a secured creditor.” Attorney Aaron Garber said approval of the lending would make issues related to use of the cash collateral moot. 

Columbine responded that filings have contained no details about the loan or its terms and that North Shore has operated without transparency in the bankruptcy proceedings. 

Rosania ordered North Shore to file a motion for a debtor-in-possession loan by Friday and said he would determine a final ruling on that and also on the cash collateral by May 18, when the next scheduled hearing is set for 1 p.m.

He will also hear at that time Columbine’s motion to appoint a Chapter 11 trustee to replace North Shore as debtor in possession of the operation.

Source: BizWest

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