The second-largest U.S. nursing home operator, HCR ManorCare, filed for Chapter 11 protection with $7.1 billion of debt, and transfer ownership to its landlord, Quality Care Properties Inc (QCP.N).  The deal includes a settlement agreement for ManorCare’s former chief executive, Paul Ormond, who was owed more than $100 million when he stepped down in September.

The New York Post had an interesting article about the history of Carlyle Group and now bankrupt HCR ManorCare, one of the largest national for-profit chains in the country.   Carlyle paid $6.3 billion in a highly leveraged buyout in 2008 to purchase HCR ManorCare. In 2018, ManorCare collapsed into Chapter 11 bankruptcy, a victim of a $7.1 billion pile of debt created by Carlyle’s greed and mismanagement.

“Ten years ago, angry nursing home workers faced off against private equity mogul David Rubenstein — accusing his Carlyle Group of being interested in nothing but sucking profits from HCR ManorCare, the nursing home behemoth it had purchased the previous year.”  Clearly, they were correct.

Carlyle’s history with ManorCare was troubled almost from the beginning. In 2010, Carlyle sold HCR’s real estate in 338 facilities to HCP, a real estate investment trust, for $6.1 billion — forcing ManorCare to pay rent.  The real estate sale allowed Carlyle to lock in a profit on ManorCare despite the care provided.

From Carlyle’s perspective, they got all their money out a long time ago,” the investor said.

“It’s really the classic sale-leaseback situation where the PE-owned company loses,” the investor said.

By 2012, ManorCare’s revenue did not cover monthly rent obligations.  HCR ManorCare had owed its landlord more than $300 million in rent.


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