New Bankruptcy Opinion: IN RE ST. JAMES NURSING AND PHYSICAL REHABILITATION CENTER, INC. – Bankr. Court, ED Michigan, 2016

In re: ST. JAMES NURSING AND PHYSICAL REHABILITATION CENTER, INC., et al. [1] , Chapter 11, Debtors.

Case No. 16-42333, Jointly Administered.

United States Bankruptcy Court, E.D. Michigan, Southern Division.

July 6, 2016.

St. James Nursing & Physical Rehabilitation Center, Inc., Debtor In Possession, represented by Michael E. Baum, Kim K. Hillary, John J. Stockdale, Jr., Jason L. Weiner.

Daniel M. McDermott, U.S. Trustee, represented by Leslie K. Berg, Claretta Evans.

ORDER REQUIRING DEBTORS TO AMEND DISCLOSURE STATEMENT

THOMAS J. TUCKER, Bankruptcy Judge.

On June 29, 2016, the Debtors in these jointly administered cases filed a plan and disclosure statement, in a document entitled “Debtors’ Amended Combined Plan of Reorganization and Disclosure Statement” (Docket # 82). The Court cannot yet grant preliminary approval of the disclosure statement contained within this document (“Disclosure Statement”). The Court notes the following problems, which the Debtors must correct.

First, in Paragraph 3.1.2.2 of the Plan on page 18, Debtors state:

The Qazi Trust shall be Allowed a Secured Claim in the amount of $2,000,000.00. The Allowed Secured Claim of the Qazi Trust shall be satisfied with the delivery of a promissory note substantially in the form to be filed in accordance with Section 1.6 as Exhibit 3.1, and paid by the Reorganized Debtor in accordance with the terms set forth herein. The promissory note shall be a five-year balloon note, shall bear interest at the rate of 3.5% per annum, and shall be amortized over twenty-five (25) years.

Debtors must state the following about the promissory note referred to: the face amount of the note; the frequency and amount of the periodic payments to be made on the note under the amortization referred to; and when such periodic payments will begin.

Second, in Paragraph 3.1.2.3 of the Plan on page 18, Debtors state: “The Reorganized Debtor shall surrender thirty-three (33) bed licenses to Qazi Trust or its designee. Each bed license is deemed to have an agreed value of $10,000.” Debtors must state whether the value of these bed licenses will be credited against the $2,000,000 Allowed Secured Claim of the Qazi Trust, or will be additional value transferred to the Qazi Trust under the Plan.

Third, in Paragraph 3.1.3.1 of the Plan on pages 18-19, Debtors state, in relevant part: “As a result, the Internal Revenue Service’s Claim may be wholly unsecured, which may be treated as either a Group II Claim or Class VII Claim, as the case may be.” (Emphasis added). In Group II of the Plan, Debtor treats priority tax claims, and in Class VII of the Plan, Debtor treats nonpriority unsecured claims. Debtor must revise Paragraph 3.1.3.1 of the Plan so that it states what portion, if any, of the Claim of the Internal Revenue Service will be treated as a priority tax claim in Group II, and what portion, if any, will be treated as a nonpriority unsecured claim in Class VII.

Fourth, in Paragraph 3.1.4 of the Plan on page 20, Debtors state, in relevant part: “As a result, the Michigan Unemployment Insurance Agency’s Claim may be wholly unsecured, which may be treated as either a Group II Claim or Class VII Claim, as the case may be.” (Emphasis added). Debtor must revise Paragraph 3.1.4 of the Plan so that it states what portion, if any, of the Claim of the Michigan Unemployment Insurance Agency will be treated as a priority tax claim in Group II, and what portion, if any, will be treated as a nonpriority unsecured claim in Class VII.

Fifth, Debtors must state or estimate the amount of the claim made by Specialized Pharmacy Services, LLC against St. James (in Paragraph 3.1.5 of the Plan on page 21), and the amount of the claim made by Iron Mountain Information Management, LLC (in Paragraph 3.1.6 of the Plan on page 23).

Sixth, Debtor must make the following changes to correct typographical errors:

• In Paragraph 3.1.2 of the Plan on page 17, Debtors must change “Class I” to “Class II.”

• In Paragraph 3.1.3.2.1 of the Plan on page 19, Debtors must change “Class II” to “Class III.”

• In Paragraph 3.3 of the Plan on page 30, Debtors must change “3.1.8(B)” to “3.1.8(A)” and “3.2.7(B)” to “3.2.7(A).”

Seventh, in Paragraph 3.2.4 of the Plan on page 28, Debtors must state what, if anything, Mission Pointe Management Services, LLC claims it is owed.

Eighth, in Paragraph 3.2.5 of the Plan on page 28, Debtors must state what, if anything, Rehabilitation Masters of MI, PC claims it is owed.

Accordingly,

IT IS ORDERED that no later than July 8, 2016, Debtors must file an amended combined plan and disclosure statement that is consistent with this Order.

IT IS FURTHER ORDERED that no later than July 8, 2016, Debtors also must file a redlined version of the amended combined plan and disclosure statement, showing the changes Debtors have made to “Debtors’ Amended Combined Plan of Reorganization and Disclosure Statement,” filed June 29, 2016.

[1] The Debtors in these jointly administered cases are St. James Nursing & Physical Rehabilitation Center, Inc. (“St. James”) (Case No. 16-42333) and MPMS St. James Real Estate Acquisition, LLC (“RE Hold Co.”) (Case No. 16-44722).

Save trees – read court opinions online on Google Scholar.

300x600

Leave a Reply