Cold Spring Acquisition, LLC, operator of a 588-bed skilled nursing and rehabilitation facility in Woodbury, New York, has filed a disclosure statement outlining a Chapter 11 liquidation plan that would provide general unsecured creditors with an estimated 2% recovery on approximately $79.1 million in claims, while personal injury claimants would be limited to recovery from insurance policies.
The disclosure statement, filed October 14, 2025, in the United States Bankruptcy Court for the Southern District of New York (Case No. 25-22002 (SHL)), details a complex restructuring that narrowly avoided facility closure after negotiations between a prospective buyer and the facility's union workforce temporarily broke down earlier this year.
Business Operations and Debt Structure
Cold Spring Acquisition operated one of the region's larger care facilities, with 588 beds and approximately 500 employees generating roughly $75.5 million in annual gross revenue in 2023. The facility provided long-term care, rehabilitative services, hospice, and dementia care, as well as a senior day program.
The company's capital structure is notably simple, with virtually no secured debt beyond claims by Greystone Funding Company, LLC. The debt obligations include approximately $20 million owed to trade creditors, approximately $21.8 million owed to landlord Cold Spring Realty Acquisition LLC (an insider entity), and approximately $15 million owed to 1199SEIU United Healthcare Workers East and its Benefit and Pension Funds.
The largest claim by far comes from Greystone Funding Company, which has asserted a pre-petition claim of $75,925,320 and an administrative claim of $3,617,232. However, under the proposed plan, Greystone will not receive any distribution from the debtor's estate because purchaser 378SYWOOD LLC has agreed to assume all obligations to Greystone.
Near-Closure and Recovery
The bankruptcy case, filed January 2, 2025, took a dramatic turn in late January when the prospective purchaser informed the debtor it would not consummate the asset purchase agreement unless a modified collective bargaining agreement was reached with 1199SEIU. When negotiations stalled in early February, the facility was operating at a weekly loss of approximately $625,000 and faced administrative insolvency.
On January 31, 2025, the debtor submitted a closure plan to the New York Department of Health providing for cessation of operations and discharge of all residents by May 15, 2025. The bankruptcy court approved the closure plan on February 14, 2025, and DOH gave its approval five days later.
However, as the facility began relocating residents to other facilities, negotiations between 1199SEIU and the purchaser resumed and ultimately resulted in an agreement. The bankruptcy court entered a receivership and sale order on March 20, 2025, and the purchaser commenced operations as receiver on April 22, 2025.
The asset purchase agreement has not yet been fully consummated, as the parties await DOH approval of the sale. The purchaser has filed its application and has been working with DOH to address questions and concerns.
Creditor Treatment and Recovery
The plan proposes six classes of claims and interests with dramatically different treatment:
Class 1 (Greystone Claim): The $79.5 million claim will be assumed by the purchaser, resulting in 100% recovery without any distribution from the debtor's estate. This class is impaired and entitled to vote.
Class 2 (Other Secured Claims): Totaling approximately $5,568 in projected allowed claims (from total asserted claims of $3.37 million), these creditors would receive cash equal to 100% of allowed amounts. This class is unimpaired and deemed to accept the plan.
Class 3 (Other Priority Claims): With projected allowed claims of approximately $88,705 (from total asserted claims of $8.69 million), these creditors would receive 100% recovery in cash. This class is unimpaired and deemed to accept.
Class 4 (General Unsecured Claims): This class faces the most significant impairment. With total asserted claims of approximately $140.3 million and projected allowed claims of approximately $79.1 million, holders would receive their pro rata share of available cash for an estimated 2% recovery. This class is impaired and entitled to vote.
Class 5 (Personal Injury Claims): With total asserted claims of $33.8 million and projected allowed claims of $32.8 million, these claimants would receive amounts available under applicable insurance policies but no distribution from the estate (0% recovery from estate assets). The disclosure notes that "all other damages (including extra-contractual damages), awards, judgments over policy limits, penalties, punitive damages and attorney's fees and costs that may be recoverable against any insurance company" would be available. Personal injury claims will not be released or enjoined against applicable insurance until settled or fully adjudicated. This class is impaired and entitled to vote.
Class 6 (Interests): All equity interests would be eliminated with no recovery. This class is deemed to reject the plan.
Liquidation Analysis
The disclosure statement includes a detailed liquidation analysis demonstrating that creditors would receive better recoveries under the plan than in a Chapter 7 liquidation. According to the analysis, general unsecured creditors would receive only 0.64% recovery in a Chapter 7 liquidation compared to the 1.79% estimated under the plan.
The analysis assumes a six-month liquidation period in Chapter 7 and attributes the lower recovery to several factors: accounts receivable would likely be sold at a deep discount rather than collected by familiar staff; additional administrative costs including a Chapter 7 trustee's statutory compensation of approximately $151,547 would be incurred; and professional fees would be higher due to new professionals needing to become familiar with the case.
The debtor's disclosure statement emphasizes that "there can be no guarantee under either an alternative Chapter 11 plan or a Chapter 7 liquidation that Holders of Allowed General Unsecured Claims would receive any recovery."
Assets and Distribution Sources
As of September 30, 2025, the debtor's remaining assets consisted of approximately $3.59 million in unrestricted cash, $2.56 million in accounts receivable from government agencies and insurance carriers, $393,081 in other receivables from government agencies, and $269,111 in prepaid expenses.
The disclosure statement notes that "the amount of these assets, with the exception of cash, is an estimate of the total amount due and subject to reduction for various reasons. The actual amounts to be recovered are expected to be lower."
Additionally, the debtor is involved in an adversary proceeding with M&T Bank concerning $550,454.57 in transferred funds. The bank alleges these funds were not property of the estate. The court has required the debtor to maintain these funds on administrative hold, and the outcome of this proceeding may affect total assets available for distribution.
Plan Implementation
The plan contemplates appointment of Martin Cauz, who currently serves as the debtor's Chief Restructuring Officer, as Plan Administrator. The Plan Administrator would have broad powers to implement the liquidation, including authority to:
- Liquidate remaining assets and collect accounts receivable
- Object to and resolve disputed claims
- Make distributions to creditors according to the priority scheme
- Prosecute causes of action and avoidance actions
- Pay taxes and wind down the estate
- Engage professionals as needed
The Plan Administrator would have all powers of a bankruptcy trustee under sections 704 and 1106 of the Bankruptcy Code but would operate free of Bankruptcy Code restrictions after the effective date, subject only to express limitations in the plan or confirmation order.
Claims Process and Objections
Bar dates have been established throughout the case. The general bar date was June 2, 2025, the governmental bar date was July 7, 2025, and the administrative claims bar date was August 18, 2025. The debtor estimates total general unsecured claims (excluding personal injury claims) of approximately $79.1 million, though notes this amount "could be higher as a result of Claims that are Allowed and other claims that are contingent, unliquidated and disputed Claims."
The debtor reserves all rights to object to claims. The disclosure statement emphasizes that "no reliance should be placed on the fact that a particular Claim or Cause of Action or projected objection to a particular Claim is, or is not, identified in this Disclosure Statement."
Voting and Confirmation
The voting deadline for the plan is December 1, 2025. To be counted, ballots must be properly completed and received by 5:00 p.m. Eastern Time on that date. Ballots may be submitted electronically through the case website or by mail to Omni Agent Solutions, which serves as voting agent.
For the plan to be confirmed under section 1129(a)(8) of the Bankruptcy Code, at least one impaired class must accept the plan. A class accepts if holders of at least two-thirds in amount and more than one-half in number of allowed claims that actually vote cast ballots in favor.
The debtor has requested authority to seek confirmation under section 1129(b) if necessary through the "cramdown" provisions, which would allow confirmation even if one or more impaired classes reject the plan, provided the plan is "fair and equitable" and "does not discriminate unfairly."
Risk Factors
The disclosure statement identifies multiple risk factors, including:
-
No guarantee of recovery: "There can be no assurances of actual recoveries to Holders of Allowed General Unsecured Claims in light of the potential claims that could be asserted against the Debtor."
-
Unliquidated litigation claims: The debtor faces "unliquidated litigation claims that have been asserted both by individual creditors and on behalf of purported class action claimants" whose ultimate exposure is "inherently unknowable."
-
Tax obligations: The debtor has filed returns through 2024 but will need to file for 2025, and "tax liability could be assessed once returns are filed."
-
Delayed effective date: Conditions precedent may not be satisfied, and "if the Plan is not consummated, there can be no assurance that the Chapter 11 Case would not be converted to a Chapter 7 liquidation."
-
Insufficient funds: The disclosure warns that "any material delay in confirming the Plan may result in insufficient funds to consummate the Plan."
Special Treatment of Personal Injury Claims
The plan includes detailed provisions for personal injury claims, including a requirement that holders seeking to pursue claims against covered parties (other than insurance) must first transmit a "Notice of Intent to Pursue Personal Injury Claims" and then wait 45 days before proceeding.
The disclosure statement explains: "Recovery by Holders of Personal Injury Claims is limited to the insurance policies and all other damages (including extra-contractual damages), awards, judgments over policy limits, penalties, punitive damages and attorney's fees and costs that may be recoverable against any insurance company because of their conduct regarding, or defense or settlement of, any Personal Injury Claim."
Importantly, "recoveries for any such judgments or awards will be against only the insurance company in accordance with the Plan and not at any time against any Covered Party or any property or interest in property of any Covered Party, beyond available Insurance Recoveries."
Exculpation and Releases
The plan includes broad exculpation provisions protecting "Exculpated Parties" from liability for acts or omissions in connection with the bankruptcy case, plan formulation, and implementation, except for acts determined by final order to constitute "fraud, willful misconduct, gross negligence, or claims for legal malpractice."
Exculpated Parties include the debtor, Chief Restructuring Officer, Independent Directors, Creditors' Committee and its members, Examiner, Patient Care Ombudsman, Plan Administrator, and their respective "Related Parties."
The disclosure emphasizes that "for the avoidance of doubt, such exculpation shall not act or be construed to channel, release, enjoin, or otherwise affect criminal enforcement actions or any Personal Injury Claim against the Debtor or any co-defendant (who is not an Exculpated Party) in litigation in which the Debtor is a defendant."
Next Steps
The confirmation hearing date has not yet been set in the filed disclosure statement, which notes it is a provisional version subject to final approval. Once the bankruptcy court approves the disclosure statement as containing adequate information under section 1125 of the Bankruptcy Code, solicitation of votes will proceed with a voting deadline of December 1, 2025.
Objections to confirmation must be filed and served by a deadline to be established by the court. The disclosure statement urges all creditors entitled to vote to accept the plan, stating: "ACCORDINGLY, THE DEBTOR BELIEVES THAT THE TREATMENT CONTAINED IN THE PLAN OF HOLDERS OF CLAIMS IN THE IMPAIRED CLASSES THAT ARE ELIGIBLE TO VOTE WILL YIELD A GREATER RECOVERY FOR SUCH HOLDERS THAN WOULD BE AVAILABLE IN A CHAPTER 7 LIQUIDATION. ACCORDINGLY, THE DEBTOR BELIEVES THAT THE PLAN IS IN THE BEST INTEREST OF HOLDERS OF SUCH CLAIMS."
The case is being handled by Manatt, Phelps & Phillips, LLP, with Schuyler G. Carroll, Russell E. Potter (admitted pro hac vice), and Thomas A. Whittington (admitted pro hac vice) representing the debtor.
This article was prepared using Stretto Conductor, our new AI-powered assistant that's here to help. Stretto Conductor was able to create this summary of a 82 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Stretto Conductor may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.