North Shore stockholders offer to lend $700,000 to nursing-home operations
LOVELAND — At least some of the majority owners of North Shore Manor nursing home in Loveland have formed a new company, Loveland Health LLC, and through that company have offered to lend $700,000 to North Shore Manor Inc. and North Shore Associates LLP to shore up its financing during the ongoing bankruptcy proceeding.
Of that amount, $393,547 would be used to pay off a note held by Wapello Holdings II LLC, a company affiliated with the nursing home’s former manager, Columbine Management Systems. The remaining $300,000 of the loan would be a revolving line of credit to permit the nursing home’s new management company to function while the company is being reorganized under bankruptcy law.
The court approved of North Shore’s new management structure last week. At that time, it gave the majority owners until Friday to file a motion for approval of a lending mechanism; that motion was filed late Friday afternoon.
In it, Loveland Health LLC, a company formed March 31 by registered agent David Fogel, one of the majority owners of North Shore, along with several other stockholders, agreed to provide financing, but with conditions.
Those conditions include provisions that would cause a default if the court approves the appointment of a trustee to run the facility instead of the already-approved management company or if the court approves an “examination of debtor” motion. Both of those motions were filed by Columbine and neither have been approved as of today.
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 allegations and insults, 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.
The loan agreement, if approved, would have the effect of removing as an issue use of cash collateral, which Columbine has attempted to preserve because of pre-petition debts that North Shore owes Columbine and Wapello. The loan would be secured by the same collateral now claimed by Wapello, and the line of credit portion would be secured by a junior lien on the facility. The interest rate would be less than what Wapello currently charges.
The loan would mature in a year, but could be renewed and, because the loan is made by North Shore Manor owners, “there is great flexibility in restructuring the loan if such as required,” the request for approval said.
The loan documents cite numerous conditions, including two that directly conflict with Columbine’s motions before the court. The loan would be in default if a trustee is appointed or if a motion requesting information is approved.
That motion, called an “ex parte motion pursuant to rule 2004 for examination of debtor and related parties,” seeks to gather information from the majority shareholders. It was filed April 25. It asks for copies of emails and correspondence from the North Shore partners, governance records, documents substantiating assets, engagement letters with professionals, insurance policies, financial and business records, banking records, efforts to secure loans and copies of communications with attorneys and consultants.
The attorney for Columbine and its owner, J. Robert Wilson, said they have not been successful in seeing information necessary for their decision-making. In addition to owning the former management company of the nursing home, Wilson is a minority shareholder.
The bankruptcy court is scheduled to meet to consider motions May 18.
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.