Case Study: Advanced Living Technologies

Situation: GCP was engaged by the creditor’s committee to evaluate management’s plan of reorganization including operations, financial projects and offered payout for a chain of skilled nursing facilities in Texas.

Unsecured creditors had received offer for 35 cents over 5 years
Committee was looking for assistance to evaluate offer, place valuation on business and explore if there was a buyer who might bring more value than a plan
Committee seeking independent assessment of management company’s effectiveness and fees

Solutions:

GCP marketed the business to various potential buyers to determine market valuation
GCP conducted detailed review of assumptions to projections, cost structure of homes and capital needs going forward
Services provided by management company were reviewed against industry norms along with fee structure
GCP conducted an evaluation of management of the homes

Results:

GCP uncovered significant errors in projections, assumptions that needed to be revised and opportunity for additional EBITDA improvements
- Cash flows were understated by nearly $2MM per year
- Management company had done some good in support of homes – opportunity to reduce fees existed due to unfilled position that were now being filled by personnel in homes and setting profit margins at industry average
Offer was revised to 60 cents over 7 years with larger down stroke