Judge Rejects Extension : Care Creditors Get Chance at Reorganization Plan

A Los Angeles bankruptcy judge Tuesday refused Tuesday to give the management of Care Enterprises more time to develop a reorganization plan acceptable to creditors of the Tustin-based nursing home chain.

Instead, Judge Arthur Greenwald agreed to allow creditors and other interested parties to submit alternative reorganization plans for the court’s consideration.

Greenwald said he will hold a hearing on Feb. 14 to discuss plans proposed by both the company and its creditors in hopes that the procedure will help iron out differences between the two groups.

Care’s management submitted an initial reorganization plan in November, but the proposal has been severely criticized by creditors. The company had hoped to win additional time to revise a compromise plan before alternative proposals could be considered.

Positions May Soften

Richard Havel, a Los Angeles attorney who represents Care’s creditors committee, said after Tuesday’s hearing that the committee intends to file a plan next month calling for Care shareholders to relinquish all ownership in the company to creditors.

In addition, Havel told the court that creditors will seek removal of the company’s management.

Havel said that while the creditors committee may soften its position in future negotiations, “we are taking the toughest position we can defend in court” in the initial proposal.

Care’s principal owners and officers are brothers Dee Roy and Lee Roy Bangerter, both of whom attended the court hearing.

After the hearing, the Bangerters characterized some creditors who have purchased Care debt securities in recent months as opportunists who are not as interested in being repaid their loans as in acquiring the company outright.

“People buy debt in troubled companies in hope of making speculative profits,” said Lee Roy Bangerter, chief executive officer of the firm.

‘Ample Time’

Irving Sulmeyer, Care’s lead attorney, said he believes that the brothers are being unfairly blamed for Care’s bankruptcy, which he said stems from financial problems beleaguering the entire nursing home industry.

Greenwald said Care, which filed a petition in March to reorganize its debts under Chapter 11 of the federal bankruptcy laws, had been allowed “ample time” to negotiate a compromise plan to appease its creditors.

The court had twice extended the “exclusivity” period for Care’s planning efforts--a time in which no competing plan could be submitted to the court. The period is scheduled to expire in January, and the company had asked the court to extend the deadline.

In the plan it submitted in early November, Care proposed to sell 25 nursing facilities and repay all of its $117-million debt, with interest, by 1995. But the company’s creditors have alleged that the plan’s financial projections are overly optimistic.

“It is time to level the playing field and give the creditors’ committee an opportunity to present its plan and if necessary to compete with the debtor,” the judge said.

The judge also said he was concerned that Care’s management might “be using the exclusivity time to force its own views on the creditors.”

Before the judge made his decision, lawyers representing Care’s creditors said little or no headway had been made in their negotiations with Care on a mutually acceptable reorganization plan. They blamed Care for not cooperating.

“From our standpoint there is something close to a refusal to negotiate,” said William Roll, a lawyer for Citibank, one of Care’s creditors.