Paradigm Revises Bid for Care Enterprises : Ohio Company Offers to Buy Back 25 Facilities From Tustin-Based Nursing Home Operator
Ralph E. Hazelbaker, president and principal owner of Paradigm Corp., said Friday that he has revised his offer to buy Tustin-based Care Enterprises Inc., a major nursing home operator on the brink of bankruptcy.
Hazelbaker said his privately held Columbus, Ohio, nursing home company no longer is seeking to buy Care Enterprises outright. Instead, to expedite a transaction and quickly give Care Enterprises a much-needed infusion of cash to pay its lenders, he initially wants to buy back only the 25 nursing homes that his Americare nursing home operation sold to Care in 1985.
Care Enterprises has acknowledged that it will probably have to seek protection from its creditors in bankruptcy court if it cannot refinance $35 million in bank loans. The company was forced to obtain an extension on a $5-million interest payment that it owes its bank lenders. That extension expires Tuesday.
Care Enterprises operates 106 nursing facilities and nursing homes in California, New Mexico, Utah, Arizona, Ohio, West Virginia and Florida.
The revised offer delivered to Care Enterprises on Thursday does not state the amount of Paradigm’s all-cash offer. Hazelbaker made his earlier offer Dec. 29.
However, Peter S. Wisher, managing director of Charterhouse Inc., an investment banker putting together financing for the proposed acquisition on Paradigm’s behalf, said Paradigm is offering a minimum of $10 million for the former Americare facilities. He added that Paradigm would also be willing to consider the purchase of other Care Enterprises nursing homes.
In 1985, Americare sold to Care Enterprises 25 nursing homes in Ohio, New Mexico and Arizona, along with other assets, including an apartment complex, an electric utility and a property management company for $25 million, Wisher said.
Hazelbaker said he also obtained $1.6 million worth of Care Enterprises’ common stock in the 1985 transaction that he has seen severely deteriorate in value. Hazelbaker and Care Enterprises are embroiled in litigation over a nursing home management contract made at the time of the sale.
Hazelbaker insisted that he is not taking advantage of Care Enterprises’ current financial difficulty to get a bargain price for its nursing homes.
“We are talking market prices for these facilities. It is not an unfair advantage,” he said.
He said he believes the cash from the transaction would greatly assist Care Enterprises, whose finances he described as being in “terribly critical shape right now.”
Hazelbaker said he has not received a reply from the management of Care Enterprises about his offer.
Care Enterprises officials could not be reached Friday for comment.
Charterhouse’s Wisher said he does not expect Care Enterprises to seriously consider Hazelbaker’s offer until its management meets with the company’s bondholders in New York early next week to see if they will accept an alternative debt restructuring plan. Wisher said he doubts the bondholders will approve the plan, which calls for a swap of $68 million worth of company bonds and notes to appease the bank lenders.
Wisher said he expects to have no trouble raising sufficient cash from institutional lenders for the acquisition.
Care Enterprises has suffered from mismanagement, Wisher said. He criticized the company for accumulating too much debt to fund the growth of its nursing home network and for loading itself with too large an administrative staff. He also said Care Enterprises has not sufficiently marketed its facilities, with the result that its nursing homes have too many vacant beds and an excessive number of indigent patients supported by low-paying Medicaid programs.
