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Judge in North Shore bankruptcy approves lending agreement; motion to dismiss next up

LOVELAND — All parties have agreed to a deal to permit majority shareholders to lend money to North Shore Manor in order to shore up operations during bankruptcy proceedings.

In federal bankruptcy court Thursday, North Shore Manor’s attorney Aaron Garber presented amended loan documents that North Shore Manor, North Shore Associates — the owner of the real estate — and Columbine Management Services Inc. all agreed.

Prior to the hearing, parties disagreed over whether the lenders could encumber the real estate as collateral on the proposed $700,000 loan.

Instead, the loan will be considered an allowed administrative expense and be given first priority under bankruptcy law.

As Garber noted, the lending facility will be used first to repay a $393,547 loan held by Wapello Holdings II LLC, a Columbine entity, with the remainder to serve as a line of credit as needed by North Shore Manor for operations during the bankruptcy.

North Shore Manor and North Shore Associates filed for bankruptcy protection in March in an effort to remove Columbine Management Services from its role as manager of the facility. The sometimes-acrimonious case has pitted Columbine Health Systems and its owner, J. Robert Wilson, against majority owners of North Shore. Wilson also owns 15% of North Shore and at one time had operational control of the nursing home. Wilson used Columbine-tethered entities to supply pharmaceutical, physical therapy, transportation and other services to North Shore.

Judge Joseph Rosania Jr. has permitted North Shore Manor to terminate its management agreement with Columbine and to appoint another party to manage the facility. That has included appointment of new vendors, which North Shore contends will help it to operate at less cost.

The judge also, last week, heard arguments about the appointment of a special trustee to run the facility. Columbine, which requested the appointment of a trustee, withdrew its request after a heated debate. 

Garber notified the parties that he will likely file for an extension of time to file a reorganization plan, which was supposed to be filed in early June. He asked that a status conference be moved, and the judge agreed to set that conference for 9 a.m. Aug. 15. That conference will be held in-person in the Denver courtroom instead of digitally, the judge said.

A hearing to consider a Columbine motion to dismiss the North Shore Associates bankruptcy proceeding, and an objection to that motion, will be heard digitally May 31. In that situation, Wilson contends that the stockholders of the real estate, most of whom inherited their shares upon the deaths of the original founders of the company, did not have standing to vote to enter bankruptcy. Keri Riley of Kutner Brinen Dickey Riley PC, the attorney for North Shore Associates, argued in an objection that Wilson as managing partner had a responsibility to handle corporate actions as each partner was admitted to partnership through inheritance, but did not. Records don’t exist, she wrote, to show that new partners were brought in as limited, non voting members.

Rosania commended the parties on reaching agreements over the past week.

“I have the interests of the residents and employees foremost on my mind,” he said.

The actions filed in Federal Bankruptcy Court in Denver are North Shore Manor Inc., case number 23-10809, and North Shore Associates LLC, case number 23-10808.

Source: BizWest