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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 29, 2000
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VENCOR, INC.
(Exact name of registrant as specified in its charter)
Delaware 001-14057 61-1323993
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation or organization) Identification No.)
One Vencor Place
680 South Fourth Street
Louisville, Kentucky
(Address of principal executive offices)
40202-2412
(Zip Code)
Registrant's telephone number, including area code: (502) 596-7300
Not Applicable
(Former name or former address, if changed since last report.)
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Items 1-4. Not Applicable.
Item 5. Other Events.
Vencor, Inc. (the "Company") announced that it has filed its plan of
reorganization (the "Plan") with the United States Bankruptcy Court for the
District of Delaware (the "Court"). The Plan represents an important step toward
finalizing a consensual arrangement among the Company's senior bank lenders,
holders of the Company's $300 million 9 7/8% Guaranteed Senior Subordinated
Notes due 2005, the United States Government (the "Government") and the
Company's unsecured creditors.
The Company is continuing its negotiations with Ventas, Inc. ("Ventas")
(the Company's principal landlord) regarding the treatment to be provided to
Ventas in the Plan. The Company believes, however, that it has substantially
completed the negotiations of the broad economic terms of the amended master
lease agreements with Ventas. The Plan incorporates these terms and compromise
positions to the remaining unresolved issues between the Company and Ventas. The
Company also is continuing to work with the Government to finalize the precise
terms of its settlement. The economic terms of the Company's settlement with the
Government have been agreed upon as well as the precise language of a Corporate
Integrity Agreement that will take effect upon the Company's emergence from
bankruptcy.
The following is a summary of certain material provisions of the Plan. The
summary does not purport to be complete and is qualified in its entirety by
reference to all of the provisions of the Plan, including all exhibits and
documents described therein, as filed with the Court and as may otherwise be
supplemented.
The Plan provides for, among other things, the following distributions:
Senior Bank Claims
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The holders of the senior bank claims will receive, in the aggregate, new
senior subordinated secured notes in the principal amount of $300 million,
bearing interest at the rate of LIBOR plus 450 basis points, with a bullet
maturity of seven years (the "New Senior Subordinated Secured Notes"). The
interest on the New Senior Subordinated Secured Notes will commence after the
first two fiscal quarters following the effective date of the Plan, and the
Company will pay its $25.9 million obligation under the Government Settlement
(as defined) in the first two fiscal quarters following the effective date of
the Plan, as described below. In addition, holders of the senior bank claims
will receive an aggregate distribution of 65.5% of the new common stock of the
reorganized Company (subject to dilution from stock issuances occurring after
the effective date of the Plan).
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Senior Subordinated Noteholder Claims
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The holders of claims under the senior subordinated notes will receive, in
the aggregate, 24.5% of the new common stock of the reorganized Company (subject
to dilution from stock issuances occurring after the effective date of the
Plan). In addition, these holders will receive, in the aggregate, warrants
issued by the Company for the purchase of an aggregate of 7,000,000 shares of
new common stock, with a five-year term, which will consist of warrants for
2,000,000 shares priced at a price per share equal to a $450 million equity
value, and warrants for 5,000,000 shares priced at a price per share equal to a
$500 million equity value.
Ventas Claim
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Ventas will receive the following treatment under the Plan:
The master leases with Ventas will be assumed as amended, and will replace
the original master lease agreements as of the effective date of the Plan (the
"Amended Leases"). The principal economic terms of the Amended Leases are as
follows:
(a) A decrease of $52 million in the aggregate minimum rent from the
annual rent as of May 1, 1999 to a new initial aggregate minimum rent of $174.6
million as of the effective date of the Plan.
(b) A 2% annual cash escalator in the aggregate minimum rent
(beginning on May 1, 2001), and a 1.5% annual accrued rent escalator (with an
interest accrual at 6% per annum), which will become payable in cash and
converted to a cash escalator on a prospective basis upon the repayment or
refinancing of the New Senior Subordinated Secured Notes.
(c) A one-time option, that can be exercised by Ventas 5 1/2 years
after the effective date of the Plan, to reset the aggregate minimum rent under
the Amended Leases to the then current fair market rental in exchange for a
payment of $5 million to the Company.
(d) Under the Amended Leases, the "Event of Default" provisions also
will be substantially modified.
In addition to the Amended Leases, Ventas will receive a distribution of
10% of the new common stock of the reorganized Company (subject to dilution from
stock issuances occurring after the effective date of the Plan).
Ventas will enter into a tax escrow agreement with the Company that
provides for the escrow of a federal income tax refund received in 2000 and
certain other federal and state income taxes until the expiration of the
applicable statutes of limitation for the auditing of the refunds. The escrowed
funds will be available for payment of certain tax deficiencies during the
escrow period. At the end of the escrow period, the Company will be entitled to
100% of the proceeds in the escrow account.
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All other agreements between the Company and Ventas, except those modified
by the Plan, will be assumed by the Company as of the effective date of the
Plan.
United States Claim
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Subject to obtaining applicable government approvals, the claims of the
United States Government (other than claims of the Internal Revenue Service and
non-monetary criminal claims, if any) will be settled through a government
settlement entered into with the Company and Ventas which will be effectuated
through the Plan (the "Government Settlement"). Under the Government
Settlement, the Company will pay the Government a total of $25.9 million, which
will be paid as follows: (i) $10 million on the effective date of the Plan and
(ii) an aggregate of $15.9 million during the first two fiscal quarters
following the effective date, plus accrued interest at the rate of 6% per annum
beginning as of the effective date of the Plan. Ventas will pay the Government
a total of $103.6 million, which will be paid as follows: (i) $34 million on
the effective date of the Plan and (ii) the remainder paid over five years,
bearing interest at the rate of 6% per annum beginning as of the effective date
of the Plan. In addition, the Company will repay the remaining balance of the
PIP obligation (approximately $71.4 million as of June 30, 2000) pursuant to the
terms previously agreed to by the Company. As previously announced, the Company
has entered into a Corporate Integrity Agreement which will become effective on
the effective date of the Plan.
General Unsecured Creditors Claims
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The general unsecured creditors of the Company will be paid the full amount
of their claims existing as of the date of the Company's reorganization filing.
The payments will be made in the form of equal quarterly payments paid over
three years with interest at the rate of 6% per annum from the effective date of
the Plan. A convenience class of unsecured creditors, consisting of creditors
holding claims in an amount less than or equal to an amount to be established by
the Company, will be paid in full on the effective date of the Plan.
Preferred Stockholder and Common Stockholder Claims
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The holders of preferred stock and common stock of the Company will not
receive any distributions under the Plan.
Other Significant Provisions
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The Board of Directors of the reorganized Company will consist of: (i)
Edward L. Kuntz; (ii) four directors selected by the holders of the senior bank
claims; and (iii) two directors selected by the holders of the senior
subordinated noteholder claims.
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A performance share plan will be approved under the Plan that provides for
the distribution of 600,000 shares of new common stock to certain key employees
of the Company. The shares will be distributed to participants in three
installments based upon the reorganized Company achieving specific equity
values. In addition, a new stock option plan will be approved under the Plan for
the issuance of stock options for up to 600,000 shares of new common stock to
certain key employees of the Company. The Plan also will provide for the
continuation of the Company's current retention plan for its employees. In
addition, the Company will pay performance bonuses upon the effective date of
the Plan.
In addition to the factors noted below, the confirmation and consummation
of the Plan are subject to a number of material conditions including, without
limitation, the receipt of the requisite acceptances from various creditor
classes to confirm the Plan and the Court's determination that the Plan
satisfies the statutory requirements for confirmation under the bankruptcy code.
There can be no assurance that the Plan as submitted will be confirmed or
consummated.
A copy of the press release is included as an exhibit to this filing.
Certain statements contained herein, including, but not limited to,
statements containing words such as "anticipate," "believe," "plan," "estimate,"
"expect," "intend," "may" and similar expressions are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements are inherently uncertain, and stockholders must
recognize that actual results may differ materially from the Company's
expectations as a result of a variety of factors, including, without limitation,
those discussed below. Such forward-looking statements are based on
management's current expectations and include known and unknown risks,
uncertainties and other factors, many of which the Company is unable to predict
or control, that may cause the Company's actual results or performance to differ
materially from any future results or performance expressed or implied by such
forward-looking statements. These statements involve risks, uncertainties and
other factors detailed from time to time in the Company's filings with the
Securities and Exchange Commission. Factors that may affect the plans or
results of the Company include, without limitation, the ability of the Company
to continue as a going concern; the delays or the inability to complete and/or
consummate the Company's plan of reorganization; the ability of the Company to
operate pursuant to the terms of its debtor-in-possession financing; the
Company's ability to satisfy the conditions to effectuate a restated debtor-in-
possession financing; the ability of the Company to operate successfully under
the Chapter 11 cases; risks associated with operating a business in Chapter 11;
adverse actions which may be taken by creditors and the outcome of various
bankruptcy proceedings; adverse developments with respect to the Company's
liquidity or results of operations; the Company's ability to attract patients
given its current financial position; the ability of the Company to attract and
retain key executives and other personnel; the effects of healthcare reform and
legislation on the Company's business strategy and operations; the Company's
ability to control costs, including labor costs in response to the prospective
payment system, implementation of its Corporate Integrity Agreement and other
regulatory actions; adverse developments with respect to the Company's
settlement discussions with the United States Government concerning ongoing
investigations; and the dramatic increase in the costs of
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defending and insuring against alleged patient care liability claims. Many of
these factors are beyond the control of the Company and its management. The
Company cautions investors that any forward-looking statements made by the
Company are not guarantees of future performance. The Company disclaims any
obligation to update any such factors or to announce publicly the results of any
revisions to any of the forward-looking statements to reflect future events or
developments.
Item 6. Not Applicable.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
Exhibit 99.1 Press Release dated September 29, 2000.
Items 8-9. Not Applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VENCOR, INC.
Dated: October 2, 2000 By: /s/ Richard A. Lechleiter
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Richard A. Lechleiter
Vice President, Finance,
Corporate Controller and
Treasurer
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