ERICKSON RETIREMENT COMMUNITIES SIGNS DEFINITIVE AGREEMENT TO SELL COMPANY TO REDWOOD CAPITAL INVESTMENTS
Baltimore Sun Blog on this topic: http://weblogs.baltimoresun.com/business/hancock/blog/2009/10/erickson_retirement_sold_enter.html
New owner will strengthen Erickson’s capital position, continue providing high-quality service and care to 23,000 existing community residents
To pave way for company sale and establish the company for long-term success, Erickson files voluntary Chapter 11 petition to restructure debt and separate core businesses
BALTIMORE, MD (October 19, 2009)—Erickson Retirement Communities, a national manager and developer of continuing care retirement communities, today announced it has signed a definitive agreement with Redwood Capital Investments LLC, an investment company controlled by leading Baltimore businessman Jim Davis, to purchase Erickson. The transaction, subject to regulatory approvals, will ensure that the mission of John C. Erickson, founder and executive chairman of Erickson, to serve America’s seniors, will continue for many years to come by providing a comprehensive solution to the company’s long-term capital needs.
To complete the sale of the company to Redwood, Erickson must restructure its debt. As a result, the company today filed a voluntary petition for Chapter 11 bankruptcy in U.S. Bankruptcy Court in Dallas, Texas. Given the nation’s severe economic crisis, Erickson had been in discussions with its lenders in recent months to restructure its debt but, despite good faith negotiations with certain of its creditors, it was unable to reach an out-of-court agreement. This voluntary action will not only enable the company to restructure its debt, but also to reorganize its core management and real estate businesses into separate yet commonly owned legal and financial entities. A separation of the management and development sides of the business means existing and future residents will be better protected from the volatility of the real estate development business, and allows for the resumption of building in developing communities as the economy improves.
“This strategic decision will benefit all members of the Erickson Community,” said John Erickson, company founder and chairman. “First and foremost, Jim Davis, whom I have known for years and hold in the highest regard, is a strong advocate of community residents; his top priority is their continued well being. Jim is fully committed to the values and vision of the company and will continue its mission. Equally important, this transaction allows Erickson to manage through the current difficult economic environment so the business can regain its financial footing and continue its mission to provide quality lifestyle for community residents, while also safeguarding residents’ financial security.”
Erickson Retirement Communities has two core businesses: its management arm, which provides services, care and amenities for community residents, and continues to operate successfully; and its real estate development arm, which acquires land for future campus growth, and has been significantly impacted by the recession.
The voluntary restructuring, sale of the company, and ongoing market process require court approval. Because this process has the support of Erickson’s lenders and the not-for-profit corporations that have management contracts with Erickson, Erickson expects the transaction, which is subject to approval of the Court, to be approved and consummated in the first quarter of 2010.
Erickson develops campuses that not-for-profit corporations unaffiliated with Erickson operate and typically contract with Erickson to manage. When campuses are completed, the not-for-profit corporations typically buy the communities from Erickson.
John Erickson founded Erickson in 1983 with the opening of Charlestown, an innovative full-service retirement community in Catonsville, Maryland, and has expanded the network of communities to 19. He and his wife Nancy created the Erickson Foundation, which funds various philanthropic organizations in Maryland and elsewhere.
About Erickson Retirement Communities
Erickson Retirement Communities is a national developer and manager of full-service continuing care retirement communities. Headquartered near Baltimore, Md., Erickson has built an innovative network of 19 communities that combine a maintenance-free active lifestyle with an ever-expanding host of amenities, social activities, and wellness and medical centers, proven to improve both physical and mental health. Erickson was named by FORTUNE as being one of the Top 100 “Best Companies to Work For®” in 2008 and 2009. For more information, visit www.erickson.com.