Tustin Nursing-Home Firm’s Reorganization OKd : Bankruptcy: Care Enterprises Inc. wins court approval of a plan that will enable it to emerge from Chapter 11 by year’s end.

Almost exactly two years after seeking protection from the U.S. Bankruptcy Court, Care Enterprises Inc. has received court approval of a reorganization plan that would enable the Tustin-based nursing-home company to emerge from Chapter 11 by the end of the year.

The plan, approved March 29 by Judge Arthur Greenwald, is scheduled to take effect Dec. 31. The delay is designed to give the company time to raise about $20 million to pay its creditors, primarily through the sale of assets, said Care Enterprises attorney David Kupetz.

Douglas Drumwright, Care Enterprises’ chief executive, said Thursday that since last November the company has raised about $5 million through the sale of interests in nine nursing homes and other facilities in California and Utah.

To raise the remaining $15 million, Drumwright said, the company will sell its real estate or leasehold interests in 12 to 20 of its remaining 78 facilities. While most of those facilities are in California, some are in New Mexico, Ohio and West Virginia.

Under the adopted plan of reorganization, Kupetz said, the current shareholders in Care Enterprises will receive 10% of the stock that will be issued in the newly organized firm, while the rest of the stock will go to the company’s unsecured creditors. The company’s bank creditors will be paid over an extended time schedule, he added.

As soon as the judge issues a written acceptance of the plan, which is expected in about a week, Kupetz said, Care Enterprises’ existing stock will be cancelled and a new board of directors will take charge of the company.

Care Enterprises filed a Chapter 11 bankruptcy petition on March 28, 1988. The basic terms for reorganizing the company’s debt were agreed to by the bank lenders, the company and the unsecured creditors last summer, Kupetz said. As part of the agreement, the founders and top two executives of the firm, brothers Dee Roy and Lee Roy Bangerter, resigned last July.

But court consideration of the plan was delayed, Kupetz said, after it became clear that Congress would repeal the Medicare Catastrophic Health Care Act, thus reducing the reimbursement that nursing homes receive from Medicare. In response, Kupetz said, the proposed reorganization plan was modified to lengthen the period for repaying Care Enterprises’ bank creditors.

Drumwright said that in selecting Care Enterprises facilities to sell, an effort will be made to divest the nursing homes causing a drain on the company’s earnings. He said the strategy also will be to retain geographic diversity and to “hold onto Health Care Network,” the company’s money-making pharmacy operation, which is believed to have strong growth potential.

Drumwright said that while Care Enterprises will report a large loss for the 1989 calendar year, he expects the company’s operations to break even in the current year and to become solidly profitable in 1991.

When Care Enterprises filed its Chapter 11 petition, it listed $256.9 million in assets and $180.4 million in debt. It entered bankruptcy after seven months of unsuccessful negotiations with lenders to restructure its debt.

Founded in 1965, Care Enterprises rapidly became one of the 10 largest nursing-home chains in the nation. But the firm sustained huge losses after a major expansion drive in 1985 when it acquired 35 nursing homes from a company called Americare. Care Enterprises lost nearly $10 million in 1986 and another $13 million in the first three quarters of 1987.