The parent company of Luther Oaks retirement community in Bloomington has reached a settlement agreement to complete a bankruptcy reorganization.
Arlington Heights-based Lutheran Life Communities filed for Chapter 11 protection just over a year ago. The nonprofit owns three continuing care retirement communities in Illinois and Indiana — Luther Oaks on Lutz Road in Bloomington, Wittenberg Village and Pleasant View, both in Indiana. There also is a skilled nursing facility; 825 seniors lived at Lutheran Life facilities at the time of the bankruptcy filing.
The settlement document filed last month identifies more than $222.5 million in estimated claims. The debtors had not analyzed all claims in the Chapter 11 filing, and the tally could be larger or smaller.
Last year, attorneys for Luther Oaks said the buildings and other property for the senior living center on Bloomington's southwest side are worth about $31 million. Taken as a whole, Lutheran Life had about $218 million in assets, according to court documents last year.
The proposed settlement shows just over $8 million in estimated resident refund obligations. That’s money residents paid for “buy-in” deposits at retirement communities. The court classified those as “unimpaired,” meaning residents or their heirs will get all that money back when they leave. The proposed order also requires Lutheran Life to abide by existing employee and retiree benefit plans. The court classified another $2.5 million in claims as unimpaired as well.
The entities comprising the remaining $210 million in claims will get less than they are owed. How much less depends on negotiated terms to replace $178 million in two series of bonds from 2019, with a new bond issue this year. Insurance rules and policy provisions, Medicare regulations, pro-rated amounts in a settlement fund for certain classes of claims and other factors also matter in setting reimbursement rates.
“The Debtors, the Reorganized Debtors or Unsecured Creditor Trustee, as applicable, retain the right to reduce any Claim by way of setoff in accordance with the Debtors’ books and records and in accordance with the Bankruptcy Code,” said the settlement.
The agreement would allow Lutheran Life to continue operating and it could allow Lutheran Life to sell some of its assets after the reorganization.
Lutheran Life had discussions for much of last year about breaking up its properties and selling them to make good on its debt. Those adjourned in November.
A hearing on the settlement proposal is scheduled Feb. 25 in federal bankruptcy court in Chicago.
