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Exhibit 99.1
[Logo of Vencor, Inc. appears here]
CONTACT: Richard A. Schweinhart
Senior Vice President and Chief Financial Officer
(502) 596-7379
Richard A. Lechleiter
Vice President of Finance,
Corporate Controller and Treasurer
(502) 596-7734
Susan E. Moss
Vice President of Corporate Communications
(502) 596-7296
FOR IMMEDIATE RELEASE
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VENCOR, INC. FILES PLAN OF REORGANIZATION
Louisville, KY (September 29, 2000). Vencor, Inc., (the "Company") today
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
and the Company's unsecured creditors.
The Company is continuing its negotiations with Ventas, Inc. (NYSE: VTR)
(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.
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"Our goal from the outset of the reorganization has been to attain a
sustainable capital structure for Vencor that will be fair to all lenders,
landlords and other creditors and that will enable us to continue to provide
high quality care to those people who cannot take care of themselves," said
Edward L. Kuntz, chairman, chief executive officer and president of Vencor. "The
development of our plan of reorganization is a significant step toward achieving
that goal."
Mr. Kuntz added that "While our discussions with Ventas are not completed,
we believe we have reached substantial agreement on the material economic terms
of our landlord/tenant relationship. Our plan reflects those terms and
compromise positions to the remaining open issues that have slowed our progress
over the past few months. With the support of our major creditor
constituencies, we intend to push forward to achieve confirmation of the plan."
A summary of certain material provisions of the Plan is attached to this
release. 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.
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.
Vencor and its subsidiaries filed voluntary petitions for reorganization
under Chapter 11 with the Court on September 13, 1999. Throughout the Chapter 11
process, the Company has maintained normal operations in its nursing centers and
hospitals.
"The continuing fulfillment of our promise to meet the needs of our
residents, patients and customers and maintain business as usual during the
reorganization is a testament to the dedication and commitment of our
employees," said Mr. Kuntz. "They have embraced the challenges of the
reorganization process and have remained focused on our patient care mission."
Vencor, Inc. is a national provider of long-term healthcare services
primarily operating nursing centers and hospitals.
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
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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 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.
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SUMMARY OF THE PLAN OF REORGANIZATION
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 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).
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.
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(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.
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.
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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.
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.
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