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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 13, 1999
VENTAS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-10989 61-1055020
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
4360 Brownsboro Road, Suite 115,
Louisville, Kentucky 40207-1642
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(Address of principal executive offices) (Zip Code)
(502) 357-9000
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(Registrant's telephone number, including area code)
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Item 5. Other Events.
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On September 14, 1999, Ventas, Inc. (the "Company" or "Ventas") announced
that its principal tenant, Vencor, Inc. ("Vencor"), had taken the initial steps
toward a comprehensive restructuring. A copy of the press release issued by the
Company on September 14, 1999 is included as an exhibit to this report, and is
incorporated herein by reference.
In connection with the bankruptcy filing by Vencor, Ventas and Vencor
entered into a stipulation (the "Stipulation") for the payment by Vencor to
Ventas of reduced minimum monthly base rent of approximately $15.1 million per
month starting in September. The Stipulation has been approved by the Bankruptcy
Court.
The payments under the Stipulation are required to be made by the fifth day
of each month, or the first business day thereafter; however, the September
payment is due no later than September 16, 1999. Starting with September, the
difference between the amount of minimum monthly base rent due under Ventas's
leases with Vencor and the monthly payment of approximately $15.1 million
accrues as an administrative expense in Vencor's bankruptcy, subject to
challenge in the bankruptcy proceeding. The monthly payment of approximately
$15.1 million under the Stipulation is not subject to challenge. August minimum
monthly base rent in the amount of approximately $18.9 million remains unpaid
and constitutes a Ventas claim in Vencor's Chapter 11 case.
The Stipulation expires on October 31, 1999, but automatically renews for
one-month periods unless either party provides a fourteen-day notice of
termination. The Stipulation may also be terminated prior to its expiration upon
a payment default by Vencor, the consummation of a plan of reorganization for
Vencor, or the occurrence of certain events under Vencor's debtor-in-possession
financing. There can be no assurance as to how long the Stipulation will remain
in effect.
The Stipulation also renews an agreement by Ventas that any statutes of
limitations or other time constraints in a bankruptcy proceeding that might be
asserted by Vencor against Ventas would be extended or tolled from April 12,
1999 until the termination of the Stipulation.
Ventas believes that the execution of the Stipulation is in the best
interest of Ventas, its creditors and its shareholders. However, the execution
of the Stipulation could be deemed to be a breach of certain covenants contained
in Ventas's Credit Agreement (the "Credit Agreement"). Were the lenders under
the Credit Agreement to allege that an "event of default" had occurred and be
successful in their position, Ventas could face the acceleration of the
outstanding indebtedness under the Credit Agreement, which could have a material
adverse effect on the business, liquidity, financial condition, and results of
operations of Ventas. The agent banks under the Credit Agreement have been
informed of the terms of the Stipulation.
A copy of the Stipulation is included as an exhibit to this filing and is
incorporated herein by reference.
This Form 8-K includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All statements regarding the Company's expected future
financial position, results of operations, cash flows, financing plans, business
strategy, expected lease income, plans and objectives of management for future
operations and statements that include words such as "anticipate," "believe,"
"plan," "estimate," "expect," "intend," and other similar expressions are
forward-looking statements. Such forward-looking statements are inherently
uncertain, and stockholders must recognize that actual results may differ from
the Company's expectations. The Company does not undertake any duty to update
such forward-looking statements.
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Factors that may affect the plans or results of the Company include,
without limitation, (i) the treatment of the Company's claims in Vencor's
Chapter 11 proceedings and the ability of Vencor to successfully reorganize
under its Chapter 11 proceedings, (ii) the ability of the Company's operators to
maintain the financial strength and liquidity necessary to satisfy their
obligations and duties under leases and other agreements with the Company and
their existing credit agreements, (iii) the extent of future healthcare reform
and regulation, including cost containment measures and changes in reimbursement
policies and procedures, (iv) increases in cost of borrowing for the Company,
(v) the ability of the Company to pay down, refinance, restructure and/or extend
its indebtedness as it becomes due, (vi) the results of the ongoing settlement
discussions pertaining to the billing disputes and other civil claims against
the Company and Vencor by the U.S. Department of Justice and other litigation
affecting the Company, and (vii) the success of the Company in implementing its
business strategy and the nature and extent of future competition. Many of such
factors are beyond the control of the Company and its management.
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Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits:
10.1 Stipulation and Order by and among Vencor Inc., Vencor
Operating Inc. and Vencor Nursing Centers Limited Partnership
and Ventas, Inc. and Ventas Realty Limited Partnership, dated
as of September 13, 1999.
99.1 Press Release dated September 14, 1999.
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SIGNATURE
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 thereunto duly authorized.
VENTAS, INC.
(Registrant)
Date: September 16, 1999
By: /s/ T. Richard Riney
------------------------------
Name: T. Richard Riney
Title: Executive Vice President
and General Counsel
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EXHIBIT INDEX
10.1 Stipulation and Order by and among Vencor Inc., Vencor
Operating Inc. and Vencor Nursing Centers Limited Partnership
and Ventas, Inc. and Ventas Realty Limited Partnership, dated
as of September 13, 1999.
99.1 Press Release dated September 13, 1999.
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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: )
) Case Nos. 99-3199 (MFW)
Vencor, Inc., et al., ) through 99-3327 (MFW)
)
) Chapter 11
Debtors and Debtors in Possession. )
) Jointly Administered
STIPULATION AND ORDER PURSUANT TO SECTION 365
OF THE BANKRUPTCY CODE REGARDING VENCOR, INC.,
VENCOR OPERATING, INC. AND VENCOR NURSING CENTERS
LIMITED PARTNERSHIP'S PERFORMANCE OF OBLIGATIONS
UNDER, AND EXTENDING THE TIME WITHIN WHICH
VENCOR, INC., VENCOR OPERATING, INC. AND VENCOR
NURSING CENTERS LIMITED PARTNERSHIP MAY
ACCEPT OR REJECT, CERTAIN AGREEMENTS
BETWEEN VENCOR, INC., VENCOR OPERATING, INC.,
VENCOR NURSING CENTERS LIMITED PARTNERSHIP,
VENTAS, INC. AND VENTAS REALTY, LIMITED PARTNERSHIP
---------------------------------------------------
This stipulation and order (the "Stipulation and Order") is entered
into as of the date set forth below by and among Vencor, Inc. ("VCI), Vencor
Operating, Inc. ("Vencor Operating"), the other above-captioned debtors and
debtors in possession (collectively with VCI and Vencor Operating, the "Debtors"
or "Vencor"), Ventas, Inc. ("VTI") and Ventas Realty Limited Partnership ("VRLP"
and together with VTI, "Ventas," and, together with Vencor, the "Parties").
WHEREAS, on the date hereof (the "Petition Date"), the Debtors filed
their respective petitions for relief under chapter 11, title 11 of the United
States Code (the "Bankruptcy Code"). They are now operating their business and
managing their property as debtors in possession pursuant to sections 1107(a)
and 1108 of the Bankruptcy Code; and
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WHEREAS, on or about April 30, 1998, VCI, Vencor Operating, VTI, First
Healthcare Corporation, Nationwide Care, Inc., Northwest Health Care, Inc.,
Hillhaven of Central Florida, Inc., Hillhaven/Indiana Partnership, St. George
Nursing Home Limited Partnership, Vencor Hospitals Illinois, Inc., Carrolwood
Care Center, Windsor Woods Nursing Home Partnership, San Marcos Nursing Home
Partnership, New Pond Village Associates, Health Haven Associates, L.P., Oak
Hill Nursing Associates, L.P., Vencor Hospitals East, Inc., Hahnemann Hospital,
Inc. and VRLP all entered into four agreements styled as master leases (jointly
and severally, as amended to date, the "Master Leases"), relating to certain
properties listed on the respective schedule 1 attached thereto; and
WHEREAS, VRLP and Vencor Nursing Centers Limited Partnership ("VNCLP")
entered into a further agreement styled as a lease on August 7, 1998 for a
nursing center in Corydon, Indiana as amended to date (the "Corydon Agreement",
and collectively with the Master Leases, the "Agreements").
WHEREAS, in the absence of this Stipulation and Order the Parties do
or may dispute, inter alia, (1) the bona fides, validity, enforceability and/or
the avoidability of the Agreements generally, (2) whether or not the Agreements
constitute leases subject to section 365 of the Bankruptcy Code ("Section 365"),
(3) to the extent that the Agreements are subject to Section 365, whether the
Agreements concern "nonresidential real property" within the meaning of section
365(d)(3) or "residential real property" within the meaning of
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section 365(d)(2) and the appropriate rent or use and occupancy, if any,
payable, and (4) whether Vencor and Ventas are separate entities or should be
substantively consolidated; and
WHEREAS, without waiver of or prejudice to (1) each Party's right,
upon the date of termination of this Stipulation and Order, to dispute, inter
alia: (a) the bona fides, validity, enforceability and/or the avoidability of
the Agreements generally, (b) whether or not the Agreements constitute leases
subject to Section 365, (c) to the extent that the Agreements are subject to
Section 365, whether the Agreements concern residential or non-residential
properties and the appropriate rent or use and occupancy, if any, payable, and
(d) whether Vencor and Ventas are separate entities or should be substantively
consolidated, (2) Ventas's right to assert a claim for any unpaid rent by or
defaults of any Vencor entity under the Agreements whether accrued prior or
subsequent to the Petition Date, and (3) any other rights, remedies, claims or
defenses the Parties have under the Agreements, other agreements by, among or
relating to the Parties and/or applicable law, the Debtors and Ventas desire to
(a) stipulate to certain conditions the satisfaction of which will constitute,
if applicable, VCI, Vencor Operating and VNCLP's timely performance of the
minimum monthly base rent obligations under the Agreements arising from and
after the Petition Date, and (b) extend, if necessary, the time under Section
365 within which VCI, Vencor Operating and VNCLP may assume or reject the
Agreements;
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NOW, THEREFORE, IT IS HEREBY AGREED AND STIPULATED, subject to Court
approval of this Stipulation, by the Parties as follows:
1. Commencing with the month of October, 1999, VCI, Vencor Operating
and VNCLP shall, on or before the fifth day of each month (provided however,
that if the fifth day is not a business day, then the next business day), pay to
Ventas minimum monthly base rent of $15,133,556.59 (the "Monthly Payment"),
provided that the Parties may agree to a later date for payment (in their sole
and absolute discretion, it being understood that nothing herein shall be deemed
to create an obligation to negotiate or otherwise reach any such agreement) in
writing without further order of the Court. For September, 1999, VCI, Vencor
Operating and VNCLP shall pay the Monthly Payment (without proration) on or
before three (3) business days after the Petition Date. Subject to paragraph 5
below, such Monthly Payment shall constitute VCI, Vencor Operating and VNCLP's
timely performance under Section 365(d)(3) of their minimum monthly base rental
obligations arising from and after the Petition Date under the Agreements for
the month within which payment is made (i.e., the minimum monthly base rent
shall be $15,133,556.59 for purposes of section 365(d)(3) only). In addition,
the Debtors shall be authorized and agree to fulfill all of their other
obligations under the Agreements as well as all of their obligations under the
Agreement and Plan of Reorganization by and between Vencor, Inc. (now Ventas,
Inc.) and Vencor Healthcare, Inc. (now Vencor, Inc.) dated as of April 30, 1998
and related
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agreements (the "Reorganization Agreements") including, without limitation,
their continuing obligation to indemnify and defend Ventas pursuant to Article
III of the Reorganization Agreements regardless of the period which obligations
relate, during the period while this Stipulation and Order is in effect as such
obligations become due (provided however that nothing herein shall constitute an
assumption of the Agreements and/or the Reorganization Agreements).
2. For each month this Stipulation and Order is in effect, Ventas
shall accrue a claim against VCI, Vencor Operating and VNCLP in an amount equal
to the difference between the minimum monthly base rent due under the Agreements
and the Monthly Payment (the "Agreement Rent Claim"), which claim shall be (a)
joint and several but only to the extent which that claim was joint and several
prior to the Petition Date against VCI and Vencor Operating with respect to the
Master Leases and VCI, Vencor Operating and VNCLP with respect to the Corydon
Agreement, and (b) several as to any other Debtor liable with respect to the
Master Leases and the Corydon Agreement in amounts proportional to their
respective obligations under the Master Leases and the Corydon Agreement. The
Agreement Rent Claim shall be given superpriority administrative creditor claim
status under section 507(b) of the Bankruptcy Code, junior in right only to any
liens or superpriority claims provided to the lenders under the Debtors' DIP
Credit Agreement, any fees due to the Office of the United States Trustee, the
Carve Out under the DIP facility (as defined in the Interim Order (i)
Authorizing Postpetition
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Financing Pursuant to 11 U.S.C. ss. 364, (ii) Granting Senior Liens and
Superpriority Administrative Expense Claim Status Pursuant to II U.S.C. ss.ss.
105, 503(b), 507 and 364, (iii) Authorizing Use of Cash Collateral Pursuant to
11 U.S.C. ss. 363, (iv) Granting Adequate Protection Pursuant to 11 U.S.C.
ss.ss. 363 and 364, and (v) Scheduling a Final Hearing Pursuant to Bankruptcy
Rule 4001(b) and (c) (the "Interim DIP Order"), as may be amended from time to
time with the approval of the DIP lenders), any liens or superpriority claims
granted to prepetition secured creditors as adequate protection for their claims
under the Interim DIP Order and the Final DIP Order, as defined in the DIP
Credit Agreement, and prepetition liens granted to the lenders under the Senior
Credit Agreement as of April 29, 1998 and related agreements, to the extent such
prepetition claims are allowed as secured. As long as the Stipulation and Order
is in effect, Ventas agrees not to assert a claim for minimum monthly base rent
due for any period on or after the Petition Date in excess of the Monthly
Payment, including but not limited to the Agreement Rent Claim, provided however
that upon the termination of the Stipulation and Order, and without limiting any
of the Parties' other rights under this Stipulation and Order, Ventas reserves
its right to seek payment of the Agreement Rent Claim under section 365(d)(3) of
the Bankruptcy Code or otherwise and the Debtors reserve their right to
challenge the amount and timing of payment of the Agreement Rent Claim, to the
extent that any such claim is allowed and provided further that Ventas shall
have the right to commence proceedings seeking the allowance and payment of such
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claim and any other appropriate remedies upon receipt by any Party of any notice
pursuant to paragraph 4(b) below and the Debtors shall have the right to contest
any such proceedings.
3. To the extent applicable, the period in which Vencor, Inc., Vencor
Operating and VNCLP may assume or reject the Agreements under section 365(d)(4)
of the Bankruptcy Code is hereby extended to and including the date which is
fifteen (15) days after the date of termination of the Stipulation and Order
pursuant to the terms herein, provided however that such extension is without
prejudice to the Debtors' right to seek an Order of the Bankruptcy Court further
extending such period pursuant to and subject to section 365(d)(4) of the
Bankruptcy Code.
4. Subject to the provisions of P. 5 below, this Stipulation and Order
shall remain in full force from the Petition Date through October 31, 1999, and
automatically each one month period thereafter (the "Effective Period"), unless
and until (a)(i) terminated by Ventas, without the need for any further order of
this Court, if VCI, Vencor Operating or VNCLP fail to make any Monthly Payment
pursuant to the terms of this Stipulation and Order, (ii) the occurrence of the
effective date of any joint plan of reorganization for the Debtors, or (iii)
terminated on three business days' written notice by Ventas, without the need
for any further order of this Court, if the DIP lenders have sent a notice
terminating the commitment under the DIP facility or an enforcement notice, or
(b) after October 31, 1999 a Party provides written notice by facsimile (receipt
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confirmed) or overnight mail (i) at least fourteen days prior to the last
business day of the then current month, of its intent to terminate, to the other
Parties, the official committee of unsecured creditors, if one is appointed, the
DIP Agent, and to the Office of the United States Trustee (collectively, the
"Notice Parties"), whereupon such termination will occur on the last day of such
month in which such written notice is given unless such termination notice is
rescinded or revoked in writing by the Party sending the termination notice on
or prior to the date which is five business days prior to the last day of such
month or (ii) after the date which is 14 days prior to the last business day of
the then current month, of its intent to terminate, to the Notice Parties,
whereupon such termination will occur on the last day of the following month
unless such termination is rescinded or revoked in writing by the Party sending
the termination notice on or prior to the date which is five business days prior
to the last day of such following month.
5. Notwithstanding any provision contained in this Stipulation and
Order to the contrary, (a) except as expressly provided in (b) below, each Party
shall have the right, upon notice of termination given pursuant to paragraph 4
or at any time thereafter to dispute, inter alia (1) the bona fides, validity,
enforceability and/or the avoidability of the Agreements generally, (2) whether
or not the Agreements constitute leases subject to Section 365, (3) to the
extent that the Agreements are subject to Section 365, whether the Agreements
concern residential or nonresidential properties, (4) the amount
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of rent or use and occupancy, if any, that need be paid on a monthly basis going
forward, (5) the amount of the administrative claim, if any, due to unpaid rent,
if applicable, for the time period that this Stipulation was in force, and other
claims for unpaid rent or defaults, if any, that Ventas may have under the
Agreements, (6) whether Vencor and Ventas are separate entities or should be
substantively consolidated and (7) any other rights, remedies, claims or
defenses the Parties have under the Agreements, other agreements by, among or
relating to the Parties and/or applicable law; and (b) the Monthly Payments to
be made during the Effective Period shall not be subject to avoidance,
recoupment, defense, setoff, counterclaim, recovery or any similar remedy or
defense.
6. The first numbered paragraph of the Tolling Agreement dated April
12, 1999 between Vencor, Inc. and Ventas, Inc. (the "Tolling Agreement") shall
be deleted and replaced with the following paragraph:
Any Vencor Claim, including, without limitation, those
arising or available under the Bankruptcy Avoidance
Provisions (defined below) that Vencor could otherwise
assert against Ventas if Vencor were a debtor in a case
under the Bankruptcy Code commenced on April 12, 1999, and
whether arising under the Bankruptcy Code or under other
applicable federal or state law, shall not be prejudiced,
impaired, or otherwise waived by Vencor's failure to
commence such a bankruptcy case or to initiate suit against
Ventas after commencement of a bankruptcy case, and any and
all statutes of limitations, repose, or other legal or
equitable constraints on the time by which such a bankruptcy
case or pleading initiating any Vencor Claim (including,
without limitation, a cause of action under ss. 548 of the
Bankruptcy Code) shall be tolled during the period of time
from April 12, 1999 to and including the date that is five
business days following the termination of the
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Stipulation and Order Pursuant to Section 365 of the
Bankruptcy Code Regarding Vencor, Inc., Vencor Operating and
Vencor Nursing Centers Limited Partnership's Performance of
Obligations Under, and Extending the Time Within Which
Vencor, Inc., Vencor Operating and Vencor Nursing Centers
Limited Partnership May Accept or Reject, Certain Agreements
Between Vencor, Inc., Vencor Operating, Inc. Vencor Nursing
Centers Limited Partnership, Ventas, Inc. and Ventas Realty,
Limited Partnership dated September 13, 1999 (the "Tolling
Period"). For all purposes herein, both the first and last
day of the Tolling Period shall be deemed to be contained in
the Tolling Period.
The foregoing tolling shall not be deemed to shorten any tolling
period otherwise provided pursuant to section 108 of the Bankruptcy Code.
7. The terms and conditions of the Agreements and each Party's rights
and remedies thereunder are not otherwise modified except as expressly stated
herein.
8. This Stipulation and Order may not be modified unless in writing
signed by all of the Parties and so ordered by the Court.
9. This Stipulation and Order shall be binding upon each of the
Parties and their successors and assigns, including, but not limited to, any
trustee appointed in any Debtor's chapter 11 case and, in the event any of these
chapter 11 cases is converted to chapter 7, any trustee appointed in such
chapter 7 case.
10. Nothing in this Stipulation and Order shall constitute admissions
by any of the Parties and shall not be used in any subsequent litigation by the
Parties or any other person
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or entity other than for the purpose of enforcement of this Stipulation and
Order.
11. Each of the Parties has the right to terminate the Stipulation and
Order upon written notice to the other Parties if this Stipulation and Order is
not signed by the Court within five (5) business days of the Petition Date.
12. Any Notices to be sent in accordance with this Stipulation and
Order will not be effective unless sent to the following:
To Ventas:
Debra Cafaro, Chief Executive Officer
Ventas, Inc.
4360 Brownsboro Road, Suite 115
Louisville, KY 40207-1642
Fax (502) 357-9029
Rick Riney, General Counsel
Ventas, Inc.
4360 Brownsboro Road, Suite 115
Louisville, KY 40207-1642
Fax (502) 357-9029
Fax (502) 357-9001
S. David Peress, Esq.
Young Conaway Stargatt & Taylor
Rodney Square North, 11th Floor
Wilmington, DE 19899-0391
Fax (302) 571-1253
Myron Trepper, Esq. and Michael J. Kelly, Esq.
Willkie, Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Fax (212) 728-8111
To Vencor:
General Counsel
Vencor, Inc.
680 South Fourth Street
Louisville, KY 40202
Fax (502) 596-4075
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Thomas J. Moloney, Esq. and Lindsee P. Granfield, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Fax (212) 225-3999
To Vencor Bank Group:
Mr. Houston Stebbins
Morgan Guaranty Trust Company
DIP Agent
60 Wall Street, 23rd Floor
New York, New York 10260
Fax (212) 648-5005
Karen Wagner, Esq.
Davis, Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Fax (212) 450-5403
Joel B. Zweibel, Esq.
O'Melveny & Myers, LLP
Citicorp Center
153 E. 53rd Street
New York, New York 10022
Fax (212) 326-2061
[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
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13. This Stipulation and Order constitutes the entire agreement of the
Parties regarding the subject matter hereof.
Dated: September 13, 1999
YOUNG CONAWAY STARGATT & TAYLOR MORRIS, NICHOLS, ARSHT & TUNNELL
- -------------------------------- --------------------------------------
S. David Peress (Del. Bar #2679) William H. Sudell, Jr. (Del. Bar #463)
Rodney Square North, 11th Floor Eric D. Schwartz (Del. Bar #3134)
Wilmington, DE 19899-0391 1201 North Market Street
(302) 571-6600 P.O. Box 1347
Wilmington, DE 19899-1347
(302) 658-9200
-and- - and -
WILLKIE FARR & GALLAGHER
Myron Trepper
Michael Kelly CLEARY, GOTTLIEB, STEEN & HAMILTON
787 Seventh Avenue Thomas J. Moloney
New York, NY 10019 Lindsee P. Granfield
(212) 728-8000 One Liberty Plaza
New York, NY 10006
(212) 225-200
Attorneys for Ventas, Inc.
and Ventas Realty,
Limited Partnership Attorneys for Debtors and Debtors
in Possession
SO ORDERED THIS _________ DAY OF
SEPTEMBER, 1999
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United Stated Bankruptcy Judge
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[VENTAS LETTERHEAD]
CONTACT: Steven T. Downey
Executive Vice President
and Chief Financial Officer
(502) 357-9030
VENTAS, INC. ANNOUNCES AGREEMENTS IN PRINCIPLE AMONG
MAJOR CREDITORS TO RESTRUCTURE VENCOR, INC.
Contemplated Deal Designed To Improve Tenant's Credit Profile
LOUISVILLE, Ky. (September 14, 1999) -- Ventas, Inc. (NYSE: VTR) ("Ventas"), the
Louisville-based real estate company, today announced that its principal tenant,
Vencor, Inc. (OTC: VCRI) ("Vencor"), has taken the initial steps toward a
comprehensive restructuring. Vencor filed a petition under Chapter 11 of the
U.S. Bankruptcy Code in Wilmington, Delaware and, at the same time, reported it
had obtained up to $100 million of working capital for its ongoing operations
during the bankruptcy proceedings.
Ventas received approximately 99 percent of its revenues in the year ending
December 31, 1998 from Vencor.
Ventas, Vencor's major creditors, and Vencor have been engaged in
negotiations for the last several months to restructure Vencor's debt and lease
obligations. These negotiations have resulted in detailed terms for a proposed
Vencor restructuring. The basic terms of this contemplated restructuring, which
Vencor outlined in connection with its bankruptcy filing, have been agreed to in
principle by most of Vencor's major creditors and Ventas, but no legally binding
agreements have been reached. Vencor did not file a Plan of Reorganization with
its bankruptcy petition.
"A restructured Vencor, with a manageable capital structure, would be
good news for Ventas," said Debra Cafaro, Ventas President and Chief Executive
Officer. "The proposed restructuring terms, if effectuated, would reduce
Vencor's adjusted debt burden by approximately $900 million to a total of
approximately $2.5 billion." Vencor, as restructured, would have an adjusted
debt to EBITDAR ratio of approximately 6 to 1, based on annualized 1999 six
months results. EBITDAR is defined as earnings before interest, taxes,
depreciation, amortization and rent. Adjusted debt is the sum of (i) total
funded debt plus (ii) annual lease obligations multiplied by a factor of eight.
"We believe that Vencor's troubled financial situation has been caused
by changes to the Medicare system that have decimated the entire long-term care
industry. While obstacles remain, if Vencor is restored to creditworthiness and
Ventas has an assured revenue stream from its principal tenant, we will be in a
much stronger position to forge our financial future," said Cafaro.
While observing that there is no certainty Vencor will be successful in
achieving an acceptable Plan of Reorganization, Cafaro said, "Ventas has been
cooperating with Vencor and
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Ventas, Inc.
Page 2
September 14, 1999
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Vencor's major creditors in discussions that we hope will create a reliable
tenant for our existing property portfolio. That, in turn, should help to
strengthen our own creditworthiness and equity value. It should also permit the
management and employees of Vencor to focus on its underlying nursing home and
long-term care hospital businesses and the patients it serves."
In the contemplated restructuring, Ventas would make approximately $45
million in annual rent concessions, effective as of May 1, 1999, resulting in
1999-2000 annual base rent of approximately $181 million. Ventas would also
receive:
o in addition to the current 2% annual cash escalator contained in
its leases with Vencor, a 1-1/2% annual non-cash rent escalator
that would accrue until the occurrence of certain specified events
and then convert to a cash escalator totaling 3 1/2% per year;
o an additional 1% annual cash rent bonus escalator payable if
Vencor's net patient revenue growth at Ventas facilities exceeds a
cumulative annual growth rate of 5%;
o a one time right to reset the rents for the facilities, exercisable
from May 2002 through May 2005, to a then fair market rental rate
for a fee of $5 million;
o 15% of the common stock and warrants in reorganized Vencor (Ventas,
in order to qualify as a Real Estate Investment Trust ("REIT"), may
not hold more than 9.9% of the fully diluted equity in Vencor.
Management of Ventas is evaluating alternatives for dealing with
any Vencor equity ultimately received in excess of the 9.9%
limitation); and
o a reaffirmation and continuation of Vencor's indemnity obligations
under the agreements governing the 1998 spin-off of Vencor from
Ventas.
Vencor and Ventas are also engaged in advanced settlement discussions
with the Department of Justice acting on behalf of the Health Care Financing
Administration and the Department of Health and Human Services' Office of the
Inspector General, relating to certain billing disputes and other civil claims
against Vencor and Ventas.
Other contemplated restructuring terms are:
o Representatives for holders of Vencor Senior Bank Debt have reached
non-binding agreements in principle to reduce the principal amount
of their debt from approximately $520 million to approximately $320
million in exchange for 56% of the common stock in the restructured
Vencor.
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Ventas, Inc.
Page 3
September 14, 1999
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o The holders of the Senior Subordinated Notes have reached
non-binding agreements in principle to convert their claims into
approximately 29% of the common stock in restructured Vencor, and
would receive warrants in the restructured company.
There can be no assurance that Vencor will be successful in obtaining
the approval of its creditors for a restructuring plan, that any such plan will
be on terms acceptable to Ventas, Vencor and its creditors, or that any
restructuring plan will not have a material adverse effect on Ventas. Nor can
there be any assurance that Vencor and Ventas will be able to reach a settlement
with the Department of Justice, or that any such settlement will be on terms
acceptable to Ventas. Ventas, Vencor and its creditors are not legally bound by
the terms of the contemplated restructuring of Vencor, and the non-binding
agreements in principle are mutually interdependent, are subject to agreement on
a satisfactory plan of reorganization and confirmation thereof and are further
subject to other conditions (including, but not limited to, negotiation and
execution of definitive documentation). In addition, Ventas's ability to agree
to certain portions of the contemplated restructuring plan for Vencor will be
subject to the approval of the lenders under Ventas's Credit Facility; there can
be no assurances that such approval will be obtained.
Ventas does not presently intend to issue further updates on the terms
of the proposed restructuring.
INTERIM VENTAS RENT
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In connection with the bankruptcy filing by Vencor, Ventas and Vencor
entered into a stipulation (the "Stipulation") for the payment by Vencor to
Ventas of reduced minimum monthly base rent of approximately $15.1 million per
month starting in September. The Stipulation has been approved by the Bankruptcy
Court.
The payments under the Stipulation are required to be made by the fifth
day of each month, or the first business day thereafter; however, the September
payment is due no later than September 16, 1999. Starting with September, the
difference between the amount of minimum monthly base rent due under Ventas's
leases with Vencor and the monthly payment of approximately $15.1 million
accrues as an administrative expense in Vencor's bankruptcy, subject to
challenge in the bankruptcy proceeding. The monthly payment of approximately
$15.1 million under the Stipulation is not subject to challenge. August minimum
monthly base rent in the amount of approximately $18.9 million remains unpaid
and constitutes a Ventas claim in Vencor's Chapter 11 case.
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Ventas, Inc.
Page 4
September 14, 1999
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The Stipulation expires on October 31, 1999, but automatically renews
for one-month periods unless either party provides a fourteen-day notice of
termination. The Stipulation may also be terminated prior to its expiration upon
a payment default by Vencor, the consummation of a plan of reorganization for
Vencor, or the occurrence of certain events under Vencor's debtor-in-possession
financing. There can be no assurance as to how long the Stipulation will remain
in effect.
The Stipulation also renews an agreement by Ventas that any statutes of
limitations or other time constraints in a bankruptcy proceeding that might be
asserted by Vencor against Ventas would be extended or tolled from April 12,
1999 until the termination of the Stipulation.
Ventas believes that the execution of the Stipulation is in the best
interest of Ventas, its creditors and its shareholders. However, the execution
of the Stipulation could be deemed to be a breach of certain covenants contained
in Ventas's Credit Agreement (the "Credit Agreement"). Were the lenders under
the Credit Agreement to allege that an "event of default" had occurred and be
successful in their position, Ventas could face the acceleration of the
outstanding indebtedness under the Credit Agreement, which could have a material
adverse effect on the business, liquidity, financial condition, and results of
operations of Ventas. The agent banks under the Credit Agreement have been
informed of the terms of the Stipulation.
LIQUIDITY
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The bankruptcy filing of Vencor and the ultimate resolution of Vencor's
obligations could significantly impact Ventas's revenues and its ability to
service its indebtedness, including its ability to pay down, refinance,
restructure and/or extend a $275 million Bridge Loan due on October 30, 1999,
and to make distributions to its stockholders.
Ventas is in discussions with its lenders regarding an extension of the
October 30, 1999 maturity date of the Bridge Loan. However, there can be no
assurance that an extension will be offered on terms which are acceptable to
Ventas. Nor can there be any assurances that Ventas will be successful in its
efforts to pay down, refinance, restructure and/or extend the remaining $275
million principal balance of the Bridge Loan and to meet its other liquidity
requirements. The failure of Ventas to pay down, refinance, restructure and/or
extend the Bridge Loan on or prior to its maturity date would likely have a
material adverse effect on the business, financial condition, results of
operations and liquidity of Ventas.
REIT QUALIFICATION AND DIVIDENDS
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Ventas intends to qualify as a REIT for the year ending December 31,
1999. Ventas thus intends to distribute at least 95% of its 1999 taxable income
to its stockholders. However, such distributions are not required to be made
quarterly. Dividends required to qualify as a REIT for the year ending December
31, 1999 can be paid as late as September 15, 2000, subject to the
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payment of an excise tax. Ventas will continue to evaluate the timing and amount
of dividends in light of developments in Vencor's financial performance,
development of Vencor's plan of reorganization and other matters in the Vencor
bankruptcy proceeding, and Ventas's business, financial condition, taxable
income, results of operations and liquidity.
Ventas is a real estate company whose properties include 45 hospitals,
219 nursing centers and eight personal care facilities operated in 36 states.
THIS PRESS RELEASE INCLUDES FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND SECTION 21E OF THE SECURITIES AND EXCHANGE ACT OF 1934,
AS AMENDED (THE "EXCHANGE ACT"). ALL STATEMENTS REGARDING VENTAS'S EXPECTED
FUTURE FINANCIAL POSITION, RESULTS OF OPERATIONS, CASH FLOWS, FINANCING PLANS,
BUSINESS STRATEGY, EXPECTED LEASE INCOME, PLANS AND OBJECTIVES OF MANAGEMENT FOR
FUTURE OPERATIONS AND STATEMENTS THAT INCLUDE WORDS SUCH AS "ANTICIPATE",
"BELIEVE", "PLAN", "SHOULD", "ESTIMATE", "EXPECT", "INTEND" AND OTHER SIMILAR
EXPRESSIONS ARE FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS ARE
INHERENTLY UNCERTAIN, AND STOCKHOLDERS MUST RECOGNIZE THAT ACTUAL RESULTS MAY
DIFFER FROM VENTAS'S EXPECTATIONS. VENTAS DOES NOT UNDERTAKE ANY DUTY TO UPDATE
SUCH FORWARD-LOOKING STATEMENTS.
FACTORS THAT MAY AFFECT THE PLANS OR RESULTS OF VENTAS INCLUDE, WITHOUT
LIMITATION, (1) THE TREATMENT OF VENTAS'S CLAIMS IN VENCOR'S CHAPTER 11
PROCEEDINGS AND THE ABILITY OF VENCOR TO SUCCESSFULLY REORGANIZE UNDER ITS
CHAPTER 11 PROCEEDINGS, (2) THE ABILITY OF VENCOR AND VENTAS'S OTHER OPERATORS
TO MAINTAIN THE FINANCIAL STRENGTH AND LIQUIDITY NECESSARY TO SATISFY THEIR
OBLIGATIONS AND DUTIES UNDER LEASES AND OTHER AGREEMENTS WITH VENTAS AND THEIR
EXISTING CREDIT AGREEMENTS, (3) THE EXTENT OF FUTURE HEALTHCARE REFORM AND
REGULATION, INCLUDING COST CONTAINMENT MEASURES AND CHANGES IN REIMBURSEMENT
POLICIES AND PROCEDURES, (4) INCREASES IN THE COST OF BORROWING FOR VENTAS, (5)
THE ABILITY OF VENTAS TO PAY, REFINANCE, RESTRUCTURE AND/OR EXTEND ITS
INDEBTEDNESS AS IT BECOMES DUE, (6) THE RESULTS OF THE ONGOING SETTLEMENT
DISCUSSIONS PERTAINING TO THE BILLING DISPUTES AND OTHER CIVIL CLAIMS AGAINST
VENTAS AND VENCOR BY THE U.S. DEPARTMENT OF JUSTICE AND OTHER LITIGATION
AFFECTING VENTAS, AND (7) THE SUCCESS OF VENTAS IN IMPLEMENTING ITS BUSINESS
STRATEGY AND THE NATURE AND EXTENT OF FUTURE COMPETITION. MANY OF SUCH FACTORS
ARE BEYOND THE CONTROL OF VENTAS AND ITS MANAGEMENT.
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