SC Healthcare Holding LLC has filed a motion in Delaware bankruptcy court to dismiss the Chapter 11 cases of 16 affiliated healthcare facilities that have been under court-appointed receivership for more than a year. The company argues that because these "El Paso Receivership Debtors" are operating under a receiver's management outside of bankruptcy court control, continuing their Chapter 11 cases serves no purpose for creditors or the estates.
The motion, filed on July 11, 2025, in the U.S. Bankruptcy Court for the District of Delaware, seeks to formalize the separation of these facilities from the broader restructuring efforts of SC Healthcare and its approximately 100 affiliated debtors. The company's reorganization plan for its remaining facilities was confirmed by the court last month, but specifically excluded the El Paso Receivership Debtors.
"The El Paso Receivership Debtors have no property subject to these Chapter 11 Cases to liquidate and distribute to satisfy the claims of any class of creditors," the company stated in its filing. "Their assets are and have been managed by the Receiver outside of the Court's supervision for over a year."
At the heart of the request is the unusual circumstance that emerged early in the bankruptcy when X-Caliber Funding LLC, a secured lender to the El Paso Receivership Debtors, successfully petitioned the court to maintain a pre-bankruptcy receivership over these facilities. On May 21, 2024, the court approved a stipulation that suspended the bankruptcy proceedings for these specific debtors, effectively removing them from the bankruptcy court's active oversight.
According to court documents, the Official Committee of Unsecured Creditors supports the dismissal request, recognizing that continuing these cases would provide no benefit to creditors.
The El Paso Receivership Debtors include skilled nursing facilities and assisted living facilities operating under various names, including El Paso HCC, Flanagan HCC, Kewanee AL, Knoxville AL, Legacy Estates AL, Marigold HCC, Monmouth AL, and Polo, along with their related holding companies.
SC Healthcare cited Bankruptcy Code sections 1112(b), 305(a), and 349 as legal bases for the dismissal, arguing that "cause exists" because the El Paso Receivership Debtors have "no reasonable likelihood of rehabilitation" within these Chapter 11 cases.
"The ultimate wind-down and dissolution, as applicable, of the El Paso Receivership Debtors can be accomplished outside the auspices of the Court," the company stated in its filing. Any matters related to these facilities will continue to be addressed in the court overseeing the receivership.
The filing represents the latest step in SC Healthcare's complex restructuring process, which began when the company and its affiliates filed for Chapter 11 protection on March 20, 2024. The bankruptcy cases have involved numerous healthcare facilities across multiple states, with different outcomes for different groups of properties.
In July 2024, X-Caliber filed a notice exercising its right under the court order to reject the sale of the El Paso Receivership Debtors' assets as part of the bankruptcy sale process. Subsequently, in October 2024, X-Caliber assigned its debt to Illinois Debt Acquisition Company, L.L.C.
The bankruptcy court has scheduled a hearing on the dismissal motion for August 5, 2025, with objections due by July 25, 2025.
SC Healthcare is represented in the bankruptcy by Young Conaway Stargatt & Taylor LLP as local counsel and Winston & Strawn LLP.
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 16 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.