Home Health & Hospice Week

Institutional investor buys home nursing chain out of bankruptcy.

Don't be surprised to see Tender Loving Care Health Services Inc. hard on the acquisition trail once its sale is completed.
 
TLC, which entered Chapter 11 bankruptcy in November 2002, was sold via auction in bankruptcy court March 8, confirms CEO James Happ. The buyer is Crescent Capital Investments Inc., an Atlanta-based mid-market investment firm that is the private equity arm of the First Islamic Investment Bank EC based in the Middle Eastern country of Bahrain.

Crescent's winning bid for TLC, which has 60 locations in 20 states and the District of Columbia, was $148.5 million in cash and about $40 million in assumption of liabilities, Crescent principle Jack Draughon says.

A marathon bidding process increased the sale price by $66.5 million, reports the Daily Deal. The other bidders included two New York private equity firms -- Charterhouse Group International Inc. and Questor Management Co. -- and eight-state HHA chain Patient Care Inc., the Deal says.

Patient Care bid $186 million in cash and liability assumption, and argued its bid was superior because it already had secured necessary permits from New York state, according to the newspaper. But the bankruptcy court favored Crescent's slightly higher bid.

Patient Care recently has purchased Rush Home Care Network from Rush University Medical Center, effective April 30, and Skilled Nursing & Rehab Associates in Reading, PA.

It is "unusual" for a company in Chapter 11 bankruptcy to generate so much interest, acknowledges Happ. He attributes the interest to TLC's "extremely successful" reorganization efforts.

The fact that TLC was forced into bankruptcy by an external event, the collapse of financier National Century Financial Enterprises, also might have been in its favor, experts say.

Crescent Mulled Home Care Purchase

Crescent contemplated entering the home care market for three years and "talked with" a number of home care organizations about acquisition before deciding on the TLC purchase, Draughon tells Eli. Crescent liked the opportunity for growth TLC represented, as well as its crack management team and its high quality of care for patients. TLC was "one of the largest and best-run companies" they examined, he says.

Crescent's future home care acquisitions will be made through TLC, Draughon explains. And those should start as soon as the change of ownership paperwork in TLC's 20 states is completed -- that's when TLC will officially change hands and be free of bankruptcy.

TLC's acquisition strategy will be "opportunistic," Draughon says -- capitalizing on available opportunities within existing service areas or in contiguous states. TLC will consider any size acquisition as an add-on, Draughon adds.

Opportunities in major markets and to leverage efficiencies will be especially attractive, Happ says.

Hospice also will play a role in TLC's future growth plans, Happ notes. "It is certainly a service line we think is a natural fit," Happ tells Eli. Currently, TLC has hospice programs in only three markets.

TLC has managed to complete one acquisition even while it's been in bankruptcy, Happ reveals. With the support of its creditors, TLC convinced the bankruptcy judge to allow it to purchase an HHA in Union Town, PA. But Happ doesn't anticipate any further acquisitions until TLC emerges from bankruptcy.

The employees working for TLC shouldn't notice any significant changes when Crescent takes ownership of TLC, Draughon says. The move should be "transparent," and in fact the company will be looking to hire more employees.

Crescent wants TLC to become "the employer of choice" in the industry, Draughon says.