South Franklin Circle Retirement Community Files for Bankruptcy
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South Franklin Circle Retirement Community Files for Bankruptcy

November 23, 2012


South Franklin Circle, a prominent retirement community in Cleveland, Ohio, is following several other retirement homes across the United States into bankruptcy court, according to a report from Bloomberg Businessweek.

The continuing care retirement community reported filed a pre-packaged bankruptcy plan, which means that it has already reached a tentative restructuring plan with its senior creditors.

Sources indicate that the plan, if approved by the bankruptcy court, would lighten the nonprofit outfit’s debt load by roughly 40 percent, which would allow it to continue operating and give it a fresh financial start.

According to the Cynthia Dunn, South Franklin Circle’s chief executive officer, the recent recession led to a "lower than expected occupancy rate," which crippled the home’s ability to independently service its debt.

Indeed, the economic downturn of the last four years devastated the retirement accounts of many older Americans, forcing them to live with relatives or stay in their own homes longer than they might have preferred.

With some entry fees topping $500,000, South Franking Circle was particularly damaged by the recession, as the company reportedly has vacancies in more than 50 percent of its independent living units and a similar percent of its assisted-living facilities.

In its bankruptcy filing, the retirement community claimed to have $166.3 million worth of debt, and a relatively similar amount of assets. The company reported losing more than $7 million in each of the last two years.

The community, which is located roughly 25 miles southeast of Cleveland and owns 90 acres of land, employs more than 100 workers, so residents of the area are eager to see the retirement home regain its financial footing.

Company officials claim that the proposed restructuring deal has been approved by the vast majority of its creditors, who would prefer to receive something rather than nothing.

Sources say the bankruptcy plan will allow South Franklin Circle to trade its secured debt, which totals $100.6 million, for a long-term secured debt of less than $67 million.

The last remaining obstacle for South Franklin Circle is to convince the bankruptcy judge that this plan is appropriate for both the retirement community and its creditors.

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