Creditors’ Bankruptcy Plan Would Oust Care’s Management

A proposal to guide Care Enterprises out of bankruptcy by placing it under new management was filed with U.S. Bankruptcy Court in Los Angeles on Wednesday by unsecured creditors of the Tustin-based nursing home chain.

The creditors’ committee plan, which would strip Care’s existing shareholders of their equity, was filed in opposition to a company proposal to retain existing management and use cash and profits from asset sales to repay its $180 million in debt by 1995.

The creditors’ plan, however, says that Lee Roy and Dee Roy Bangerter, the twin brothers who together own about 44% of Care’s common stock, must be removed from day-to-day management of the company and from its board of directors.

“Basically, there has been a real breakdown of confidence and support” in the Bangerters, said Richard W. Havel, attorney for the unsecured creditors.

Havel said the plan proposes that Care’s existing common stock be invalidated and that new stock in the company be issued to the unsecured creditors for repayment of about $80 million in notes and debentures.

Neither Bangerter could be reached for comment Wednesday, nor could the company’s attorneys.

Havel, however, said the Bangerters have adamantly resisted giving up the reins of the company. Lee is chairman and chief executive officer, and Dee is chief financial officer.

“In our view, it is the creditors today who are entitled to own the company,” Havel said and added that the Bangerters “very, very much want to stay involved (in the management), and we think it is a bad idea. We are in the process of identifying candidates to serve as the new operating officers.”

He said replacements for the Bangerters would be chosen by the time the court decides whether to approve the plan.

Also under the unsecured creditors’ plan, Care Enterprises’ bank creditors--Wells Fargo and Citibank, who together are owed about $40 million--would be paid off in full in 6 years, rather than in the 3 years that the company plan proposes.

The plan further provides for the repayment of about $60 million of mortgages on Care facilities.

Like the company management plan that was filed with the bankruptcy court in November, the creditors’ plan anticipates that Care will sell 25 nursing homes to reduce its chain to 69 facilities by June, 1990.

Havel said the changes in the creditors’ committee plan reflect the unsecured creditors’ belief that current management at Care Enterprises is too optimistic about the value of the company and Care’s ability to generate income in the future.

He said the committee’s financial consultants have valued Care Enterprises, including its subsidiaries--which are not in bankruptcy--at $140 million to $160 million. He said that is at least $40 million less than the value that Care’s management places on the business.

Havel contends that the unsecured creditors will not be repaid the entire $80 million they are owed but that by taking one share of stock for every $10 of debt they will be receiving 50 to 75 cents on each dollar they are owed.

Care’s trade creditors, who are owed about $750,000, would also be reimbursed about 50 cents on the dollar--either in cash or stock--under the unsecured creditors’ plan.

Bankruptcy Judge Arthur Greenwald said he will study management’s and the unsecured creditors’ plans for repaying Care’s debt before determining whether to approve one or to fashion a compromise.

A hearing on disclosure statements that detail the financial premise of both plans is scheduled for Feb. 14.