Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 1 of 40

Transcription

1 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 1 of 40 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION In re: PREFERRED CARE INC., et. al. Debtors. Chapter 11 Case No.: (Jointly Administered) STATEMENT OF FINANCIAL AFFAIRS FOR SF HEALTH FACILITIES-CASA REAL, L.P. ( )

2 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 2 of 40 Stephen A. McCartin (TX ) Mark C. Moore (TX ) GARDERE WYNNE SEWELL LLP 2021 McKinney Avenue, Suite 1600 Dallas, TX Telephone: (214) Facsimile: (214) smccartin@gardere.com mmoore@gardere.com PROPOSED COUNSEL TO DEBTORS AND DEBTORS-IN-POSSESSION IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION In re: Preferred Care Inc. Bowling Green Health Facilities, L.P. Brandenburg Health Facilities, L.P. Cadiz Health Facilities, L.P. Campbellsville Health Facilities, L.P. Elizabethtown Health Facilities, L.P. Elsmere Health Facilities, L.P. Fordsville Health Facilities, L.P. Franklin Health Facilities, L.P. Hardinsburg Health Facilities, L.P. Henderson Health Facilities, L.P. Irvine Health Facilities, L.P. Morganfield Health Facilities, L.P. Owensboro Health Facilities, L.P. Paducah Health Facilities, L.P. Pembroke Health Facilities, L.P. Richmond Health Facilities - Kenwood, L.P. Richmond Health Facilities - Madison, L.P. Salyersville Health Facilities, L.P. Somerset Health Facilities, L.P. Springfield Health Facilities, L.P. Stanton Health Facilities, L.P. Artesia Health Facilities, L.P. Bloomfield Health Facilities, L.P. Clayton Health Facilities, L.P. Desert Springs Health Facilities, L.P. Espanola Health Facilities, L.P. Gallup Health Facilities, L.P. Lordsburg Health Facilities, L.P. Chapter 11 Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Case No.: Gardere v.6

3 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 3 of 40 Pinnacle Health Facilities XXXIII, L.P. Raton Health Facilities, L.P. SF Health Facilities, L.P. SF Health Facilities-Casa Real, L.P. Silver City Health Facilities, L.P. Debtors. Case No.: Case No.: Case No.: Case No.: Case No.: GLOBAL NOTES AND STATEMENT OF LIMITATIONS, METHODOLOGY, AND DISCLAIMER REGARDING SCHEDULES AND STATEMENTS OF DEBTORS The Schedules of Assets and Liabilities (the Schedules 1 ) and Statement of Financial Affairs (the Statements and, collectively with the Schedules, the Schedules and Statements ) filed by Preferred Care Inc. and each of its debtor affiliates, as debtors and debtors in possession (collectively, the Debtors ) 2, in the above-captioned bankruptcy cases pending before the United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division (the Bankruptcy Court ) were prepared pursuant to 11 U.S.C. 521 and Federal Rule of Bankruptcy Procedure 1007 by the Debtors financial advisor in connection with the Debtors personnel and/or personnel at PCPMG Consulting, LLC ( PCPMG Consulting ), the company that provides management services to the Debtors. The Schedules and Statements are unaudited. While the persons responsible for the preparation of the Schedules and Statements have made a reasonable effort to ensure that the Schedules and Statements are accurate and complete based on information known to them at the time of preparation after reasonable inquiries, inadvertent errors may exist and/or the subsequent receipt of information may result in material changes in financial and other data contained in the Schedules and Statements that may warrant amendment of same. Moreover, because the Schedules and Statements contain unaudited information that is subject to further review and potential adjustment, there be can no assurance that these Schedules and Statements are complete or accurate. These Global Notes comprise an integral part of the Schedules and Statements and should be referred to and considered in connection with any review of them. 1. Cases. On November 13, 2017 (the Petition Date ), the Debtors filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. The resulting cases (the Chapter 11 Cases ) were administratively consolidated into Case No The Debtors are authorized to continue operating their businesses and manage their property as debtors-inpossession pursuant to 1107(a) and 1108 of the Bankruptcy Code. Chapter 11 Case shall mean the main bankruptcy case for Preferred Care Inc., Case No Amendments. Debtors reserve their right to amend the Schedules and Statements in all respects at any time as may be necessary or appropriate, including, without limitation, the right to dispute or to assert offsets or defenses to any claim reflected on the Schedules and 1 The term Schedules includes: Schedules A/B, D, E/F, G, and H, along with the applicable summaries and all attachments appurtenant thereto. 2 A list of the Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, is attached hereto. Gardere v.6 2

4 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 4 of 40 Statements as to amount, to liability, or to classification, or to otherwise subsequently designate any claim as disputed, contingent, or unliquidated. Any failure to designate a claim as contingent, unliquidated, or disputed does not constitute an admission by Debtors that such claim is not contingent, unliquidated, or disputed. 3. Estimates and Assumptions. The preparation of the Schedules and Statements requires the Debtors to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities on the date of the Schedules and Statements, and the reported amounts of revenues and expenses during the reporting period. 4. Unknown Amounts. Some of the scheduled assets and liabilities may be unknown and unliquidated at this time. In such cases, the amounts may be listed as Unknown or Unliquidated. Accordingly, the Schedules and the Statements may not accurately reflect the aggregate amount of the Debtors assets and liabilities. 5. Prepetition v. Post-Petition. Debtors have sought to allocate liabilities between the pre-petition and post-petition periods based on the information from research that was conducted with the preparation of these Schedules and Statements. As additional information becomes available and further research is conducted, the allocation of liabilities between prepetition and post-petition periods may change. 6. GAAP. Given the difference between the information requested in the Schedules and Statements, and the financial information utilized under generally accepted accounting principles in the United States ( GAAP ), the aggregate asset values and claim amounts set forth in the Schedules and Statements do not necessarily reflect the amounts that would be set forth in a balance sheet prepared in accordance with GAAP. 7. Asset Values. To date, the Debtors have not conducted an appraisal and/or audit of their assets, particularly the membership interests owned by Preferred Care Inc. in other entities. Therefore, some assets have been listed as having unknown or unliquidated values rather than values that may be otherwise incorrect or based on incomplete information. To the extent an asset is listed on the Schedules and described in the Statements, unless otherwise noted therein, such assets disclosed in the Schedules and Statements were included therein as a result of the Debtors books and records having reflected the existence of such assets as of the Petition Date. 8. Causes of Action. The Debtors reserve all of their causes of action. Neither these Global Notes nor the Schedules and Statements shall be deemed a waiver of any such cause of action. Furthermore, nothing contained in the Schedules and Statements shall constitute a waiver of rights with these chapter 11 cases, equitable subordination, and/or causes of action arising under the provisions of chapter 5 of the Bankruptcy Code and other relevant nonbankruptcy laws to recover assets or avoid transfers. 9. Insiders. In the circumstances where the Schedules and Statements require information regarding insiders and/or officers and directors, included therein are Debtors (a) members, general partners, and/or limited partners (or persons in similar positions), (b) Gardere v.6 3

5 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 5 of 40 employees that are, or were during the relevant period, officers (or persons in control), (c) family members of officers/members, and (d) affiliates as such term is defined in the Bankruptcy Code. The listing of a party as an insider is not intended to be nor should it be construed as a legal characterization of such party as an insider and does not act as an admission of any fact, claim, right, or defense, and all such rights, claims, and defenses are hereby expressly reserved. Further, employees that are not directors or officers have not been included in this disclosure. Nothing contained in the Schedules and Statements is deemed to be an admission or legal conclusion as the comprehensive scope of the inclusion or exclusion of persons qualifying as insiders in terms of control of the Debtors, management responsibilities or functions, decisionmaking or corporate authority and/or as otherwise defined by applicable law, including, without limitation, the federal securities laws, or with respect to any theories of liability or for any other purpose. The Debtors reserve all rights to amend, supplement, revise the Schedules and Statements with regard to any matters concerning its insiders, as such term is defined in the Bankruptcy Code and their progeny. The Debtors reserve all rights to require an order from the Bankruptcy Court regarding the scope of particular persons deemed to be insiders. Item 4 of the Statements requires the Debtors to disclose payments or transfers made within 1 year before filing the bankruptcy case on debts owed to an insider or guaranteed or co-signed by an insider unless the aggregate value of all property transferred to or for the benefit of the insider is less than $6, Managers, Directors, or Officers. The Debtors disclosed the identity of certain officers and/or directors in Section 28 of each Statement. The Debtors inclusion of these persons in Section 28 of each Statement is not intended to be an admission or a legal conclusion as the status of such persons as Directors, Officers, Managers, Insiders, or otherwise a person in control of the Debtor. For the sake of clarity and out of an abundance of caution, the Debtors have included such persons in response to Section 28 of the Statement for the purpose of candid disclosure of information in these Bankruptcy Cases. The Debtors reserve all rights to amend, supplement, revise the Schedules and Statements with regard to any matters concerning any persons deemed to Directors, Officers, Managers, Insiders, or otherwise a person in control of the Debtors, as such terms may be defined in the Bankruptcy Code and their progeny. The Debtors reserve all rights to require an order from the Bankruptcy Court regarding the scope of particular persons deemed to be Directors, Officers, Managers, Insiders, or otherwise a person in control of the Debtors. 11. Summary of Reporting Policies and Practices. The following conventions were adopted by the Debtors in preparation of the Schedules and Statements: a. Fair Market Value; Book Value. Unless otherwise noted therein, the Schedules and Statements reflect the carrying value of the assets/liabilities as listed in the Debtors books and records. Except as set forth above with respect to membership interests owned by the Debtors, where the current market value of assets is unknown, the Debtors have based their valuation on book values; however, the actual value may differ. b. Disputed, Contingent and/or Unliquidated Claims. Schedules D, E, and F permit the Debtors to designate a claim as disputed, Gardere v.6 4

6 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 6 of 40 contingent, and/or unliquidated. A failure to designate a claim on any of these Schedules and Statements as disputed, contingent, and/or unliquidated does not constitute an admission that such claim is not subject to objection. The Debtors reserve the right to dispute, or assert offsets or defenses to, any claim reflected on these Schedules and Statements as to amount, liability, or status. c. Revenues. In reference to Section 1 of Part 1 in Form 207 of the Debtors Statements, the Debtors disclosure of their gross revenue includes revenue through November 13, d. Claims. Certain of the Schedules and Statements list creditors of the Debtors as of the Petition Date. As discussed below, the Court has authorized (but not directed) the Debtors to, among other things, continue certain prepetition practices regarding some of those claims. Under this authority, the Debtors paid a number of prepetition claims, including, without limitation, certain prepetition wages and employee compensation/benefits. e. Employee Claims. The Bankruptcy Court entered an order authorizing the Debtors to pay prepetition and post-petition wages, salaries, benefits and other obligations. The Debtors employed approximately 2,500 employees as of the Petition Date. Accordingly, only employee claims against the Debtors for prepetition amounts that have not been paid as of the time that the Schedules and Statements were prepared, if any, and employee claims for items not authorized to be paid by order of the Bankruptcy Court, if any, have been included in the Schedules and Statements. f. Transfers/Payments to Facility Support Funding, LLC and/or FSF II, LLC. Question 4 of the Debtors Statements requires the listing of payments or transfers made within 1 year prior to the Petition Date on debts owed to an insider. Due to the nature of the Debtors cash management system, whereby all collections for the non-hud Debtors are deposited into accounts managed by Facility Support Funding, LLC ( FSF ), swept and applied to pay down the Wells Fargo line of credit (for those Debtors included in such line), and then advanced back to FSF, the Debtors have not listed payments, transfers, or offsets to FSF in questions 3 or 4 of the Statements. Similarly, the HUD Debtors have not listed payments, transfers or offsets to FSF II, LLC ( FSF II ). The HUD Debtors are not included in the Wells Fargo line of credit, but their collections are deposited into FSF II accounts before being used for the HUD Debtors benefit. For more information on the Debtors cash management systems, see the Debtors Motion for Interim and Final Orders (A) Authorizing Continued Use of Existing (I) Cash Management System, (II) Accounts and Business Forms, and (III) Deposit Practices; (B) Maintaining Resident Gardere v.6 5

7 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 7 of 40 Trust Fund Accounts; (C) For An Extension of Time to Comply with Section 345 of the Bankruptcy Code; and (D) Scheduling a Final Hearing filed at Docket No. 15 in Case No g. Preferred Care Inc. Statement Questions 3 and 4. For questions 3 and 4 of its Statements, Preferred Care Inc. has not included payments arguably made on its behalf on account of lease obligations pursuant to certain master leases for properties where the Debtors and their Non-Debtor affiliates operate facilities in New Mexico, Kentucky, and other states where the Debtor and Non-Debtor facilities pay the applicable landlords directly (or payments are made on their behalf by FSF and FSF II as described above). Consult the applicable facilities Schedules and Statements for more information as to such payments by each Debtor facility. 12. First-Day Orders. Pursuant to various orders issued by the Court, the Debtors were authorized to pay certain outstanding prepetition claims, including, without limitation, to the following claims relating to employee compensation, benefits, reimbursable business expenses. To the extent claims have been paid, such claims have not been listed on the Schedules and Statements. To the extent such a claim is listed on the Schedules and Statements, inadvertently or otherwise, the Debtors do not waive any right to amend the Schedules and Statements or subsequently object to such claims. 13. Ordinary Course of Business. In the ordinary course of its business, the Debtors apply credits against amounts otherwise due to vendors. These credits arise because, among other matters, materials ordered and paid for may not be delivered, materials delivered are damaged or unuseable, and vendors provide volume rebates and cash discounts. Certain of these credits are subject to change. Vendor claims are listed at the amounts entered on the Debtors books and records as of the Petition Date, which may reflect creditors or allowances due from such creditors to the Debtors. The Debtors reserve all of their rights respecting such credits and allowances. 14. Executory Contracts and Unexpired Leases. For purposes of the Schedules and Statements, the Debtors have only scheduled claims and executory contracts for which the Debtors may be contractually and/or directly liable. While every reasonable effort has been made to ensure the accuracy of Schedule G regarding executory contracts and unexpired leases, inadvertent errors or omissions may have occurred. The Debtors hereby reserve all of their rights to dispute the validity, status or enforceability of any contract, agreement, or lease set forth on Schedule G that may have expired or may have been modified, amended, and supplemented from time to time by various amendments, restatements, waivers, estoppel certificates, letters and other documents, instruments, and agreements which may not be listed on Schedule G. Certain of the leases and contracts listed on Schedule G may contain certain renewal options, guarantees of payment, options to purchase, rights of first refusal, and other miscellaneous rights. Such rights, powers, duties and obligations are not set forth on Schedule G. Certain of the executory agreements may not have been memorialized in writing and could be subject to dispute. In addition, the Debtors may have entered into various other types of agreements in the ordinary Gardere v.6 6

8 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 8 of 40 course of its business, such as easements, right of way, subordination, non-disturbance and attornment agreements, supplemental agreements, amendments/letter agreements, title agreements and confidentiality agreements. Such documents may not be set forth on Schedule G. The Debtors reserve all of their rights to dispute or to challenge the characterization of the structure of any transaction, or any document or instrument related to a creditor s claim. In the ordinary course of business, each Debtor may have entered into agreements, written or oral, for the provision of certain services on a month-to-month or at-will basis. Such contracts may not be included on Schedule G. But the Debtors reserve the right to assert that such agreements constitute executory contracts. Listing a contract or agreement on Schedule G does not constitute an admission that such contract or agreement is an executory contract or unexpired lease. The Debtors reserve all rights to challenge whether any of the listed contracts, leases, agreements or other documents constitute an executory contract or unexpired lease, including if any are unexpired non-residential real property leases. Any and all of the Debtor s rights, claims, and causes of action regarding the contracts and agreements listed on Schedule G are hereby reserved and preserved. Neither the Debtors, their agents, nor their attorneys guarantee or warrant the accuracy, the completeness, or correctness of the data that is provided herein or in the Schedules and Statements, and neither is liable for any loss or injury arising out of or caused in whole or in part by the acts, errors or omissions, whether negligent or otherwise, in procuring, compiling, collecting, interpreting, reporting, communication or delivering the information hem. While every effort has been made to provide accurate and complete information herein, inadvertent errors or omissions may exist. The Debtors and their agents, attorneys and advisors expressly do not undertake any obligation to update, modify, revise or re-categorize the information provided herein, or to notify any third party should the information be updated, modified, revised or recategorized. In no event shall the Debtors or their agents, attorneys and advisors be liable to any third party for any direct, indirect, incidental, consequential or special damages (including, but not limited to, damages arising from the disallowance of a potential claim against the Debtors or damages to business reputation, lost business or lost profits), whether foreseeable or not and however caused, even if the Debtors or their agents, attorneys and advisors are advised of the possibility of such damages. 15. Reservation of Rights. Reasonable efforts have been made to prepare and file complete and accurate Statements and Schedules; however, inadvertent errors or omissions may exist. The Debtors reserve all rights to (i) amend or supplement the Statements and Schedules from time to time, in all respects, as may be necessary or appropriate, including, without limitation, the right to amend the Statements and Schedules with respect to claim ( Claim ) description or designation; (ii) dispute or otherwise assert offsets or defenses to any Claim reflected in the Statements and Schedules as to amount, liability, priority, status or classification; (iii) subsequently designate any Claim as disputed, contingent, or unliquidated; or object to the extent, validity, enforceability, priority, or avoidability of any Claim. Any failure to designate a Claim in the Statements and Schedules as disputed, contingent, or unliquidated does not constitute an admission by the Debtors (or any individual debtor) that such Claim or amount is not disputed, contingent, or unliquidated. Listing a Claim does not constitute an admission of liability by the Debtor against which the Claim is listed. Furthermore, nothing contained in the Statements and Schedules shall constitute a waiver of rights with respect to each Debtor s chapter 11 case, including, without limitation, issues involving Claims, substantive Gardere v.6 7

9 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 9 of 40 consolidation, defenses, equitable subordination, and/or causes of action arising under the provisions of chapter 5 of the Bankruptcy Code and any other relevant non-bankruptcy laws to recover assets or avoid transfers. Any specific reservation of rights contained elsewhere in the Global Notes does not limit in any respect the general reservation of rights contained in this paragraph. Notwithstanding the foregoing, the Debtors shall not be required to update the Statements and Schedules except as may be required by applicable law. 16. Liabilities. The Debtors have sought to allocate liabilities between the prepetition and post-petition periods and between Debtor and Non-Debtor entities based on the information and research conducted in connection with the preparation of the Statements and Schedules. As additional information becomes available and further research is conducted, the allocation of liabilities between the prepetition and post-petition periods may change. Accordingly, each Debtors reserve all of their rights to amend, supplement, or otherwise modify its Statements and Schedules as is necessary or appropriate. The liabilities listed on the Schedules do not reflect any analysis of Claims under section 503(b)(9) of the Bankruptcy Code. Accordingly, the Debtors reserve all of their rights to dispute or challenge the validity of any asserted Claims under section 503(b)(9) of the Bankruptcy Code or the characterization of the structure of any such transaction or any document or instrument related to any creditor s Claim. 17. Excluded Assets and Liabilities. The Debtors have excluded certain categories of assets, and liabilities from the Statements and Schedules, including, without limitation, certain assets and liabilities that they believe are property or obligations of Non-Debtor affiliates. The Debtors have also excluded rejection damage Claims of counterparties to executory contracts and unexpired leases that may or may not be rejected, to the extent such damage Claims exist. In addition, certain immaterial assets and liabilities may have been excluded. The Bankruptcy Court has authorized (but not directed) the Debtors to pay, in their discretion, certain outstanding Claims on a post-petition basis. Prepetition liabilities that have been paid post-petition or those that each Debtor anticipates paying via this authorization have not been included in the Schedules. Please see the notes to Schedule E/F for additional information. 18. Intellectual Property Rights. Exclusion of any intellectual property shall not be construed as an admission that such intellectual property rights have been abandoned, terminated, assigned, expired by their terms, or otherwise transferred pursuant to a sale, acquisition, or other transaction. 19. Classifications. Listing (a) a Claim on Schedule D as secured, (b) a Claim on Schedule E/F as priority, (c) a Claim on Schedule E/F as unsecured, or (d) a contract on Schedule G as executory or unexpired, does not constitute an admission by any Debtor of the legal rights of the claimant or a waiver of any Debtor s rights to re-characterize or reclassify such Claims or contracts or to setoff of such Claims. 20. Currency. Unless otherwise indicated, all amounts are reflected in U.S. dollars. 21. Intercompany Payables and Receivables. Intercompany receivables/payables are Gardere v.6 8

10 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 10 of 40 set forth on Schedules B and E/F, respectively. The listing by each Debtor of any account between a Debtor and another affiliate is a statement of what appears in the Debtors books and records and does not reflect any admission or conclusion of any Debtor regarding the allowance, classification, characterization, validity, or priority of such account. The Debtors periodically record intercompany amounts for combined entities, which could result in discrepancies for allocation between legal entities. The Debtors take no position in these Statements and Schedules as to whether such accounts would be allowed as a Claim, an Interest, or not allowed at all. The Debtors and all parties in interest reserve all rights with respect to such accounts. 22. Setoffs. The Debtors periodically incur certain setoffs in the ordinary course of business. Setoffs in the ordinary course can result from various items including, but not limited to, intercompany transactions, pricing discrepancies, returns, refunds, negotiations and/or disputes between a Debtor and its customers and/or suppliers. These normal setoffs are consistent with the ordinary course of business in the Debtors industry and can be particularly voluminous, making it unduly burdensome and costly for the Debtors to list such ordinary course setoffs. Therefore, although such setoffs and other similar rights may have been accounted for when scheduling certain amounts, these ordinary course setoffs are not independently accounted for, and as such, are or may be excluded from the Debtors Statements and Schedules. 23. Employee Addresses. Pursuant to the Order Granting Motion for Entry of An Order (I) Authorizing the Filing of A Consolidated List of Creditors and a Consolidated List of the 30 Largest Unsecured Creditors, (II) Authorizing the Debtors to Redact Certain Personal Information for Individual Creditors, and (III) Approving the Proposed Form of Proof of Claim in these Cases [Docket No. 62], current employee addresses have been redacted from the Debtors Schedules and Statements where applicable. 24. Debtors Addresses. For the purposes of the Statements and Schedules, all addresses for all Debtors have been reported as the Debtors headquarters address in Plano, Texas. Specific Notes with Respect to the Debtors Schedules of Assets and Liabilities The Schedules neither purport to represent financial statements prepared in accordance with GAAP, nor are they intended to be fully reconciled with the financial statements of the Debtors. Additionally, the Schedules contain unaudited information that is subject to further review and potential adjustment, and reflect the Debtors reasonable best efforts to report the assets and liabilities of each Debtor. Moreover, given, among other things, questions about the characterization of certain assets and the valuation and nature of certain liabilities, to the extent that any Debtor shows more assets than liabilities, this is not an admission that such Debtor was solvent as of the Petition Date or at any time before the Petition Date. Likewise, to the extent any Debtor shows more liabilities than assets, this is not an admission that such Debtor was insolvent as of the Petition Date or at any time before the Petition Date. 1. Schedule A/B, Part 3, Question 11 Accounts Receivable The Debtors reflect gross accounts receivable balances by entity based on detailed subledger information. Gross accounts receivable are reduced by an allowance for doubtful Gardere v.6 9

11 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 11 of 40 accounts. In establishing each Debtors allowance for doubtful accounts, management considers historical collection experience, the aging of the account, the payor classification and resident payment patterns. 2. Schedule A/B, Part 5, Question 22 Other Inventory or Supplies The amounts listed for Medical Supplies & Pharmaceuticals includes both supplies kept in the ordinary course of the Debtors business at their facilities and pharmaceuticals kept for the benefit of the Debtors residents. 3. Schedule A/B, Part 11, Question 72 Tax Refunds and Unused Net Operating Losses The Debtors have not finalized the calculation of the 2017 net operating loss. Upon finalization of the calculation the amount of net operating losses may be materially higher than the amount currently listed. 4. Schedule A/B, Part 11, Question 73 Interests in insurance policies or annuities The Debtors maintain a variety of insurance policies including property, general liability, and workers compensation policies and other employee-related policies. The Debtors interest in these types of policies is limited to the amount of the premiums that the Debtors prepaid, if any, as of 11/13/2017. To the extent the Debtors have made a determination of the amount of prepaid insurance premiums as of 11/13/2017, such amounts are listed on the schedules. All policies are expected to remain active at this time. 5. Schedule A/B, Part 11, Question 74 Causes of action against third parties The Debtors have only listed active affirmative litigation on the Schedules. The Debtors may have other causes of action, and are not waiving any rights to pursue such causes of action in the future. 6. Schedule D Except as specifically stated herein, real property lessors, utility companies and other parties that may hold security deposits have not been listed on Schedule D. The Debtors have not included parties that may believe their Claims are secured through setoff rights or inchoate statutory lien rights, including certain parties from whom the Debtors have received lien notices but whose notices the Debtors understand have not yet been filed or recorded. While reasonable efforts have been made, determination of the date upon which each claim in Schedule D was incurred or arose would be unduly burdensome or cost prohibitive, and therefore the Debtors may not list a date for each claim listed on Schedule D. Finally, the Debtors are taking no position on the extent or priority of any particular creditor s lien. Gardere v.6 10

12 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 12 of Schedule E/F Certain of the claims of state and local taxing authorities set forth in Schedule E/F, ultimately may be deemed to be secured claims pursuant to state or local laws. In addition, certain of the claims owing to various taxing authorities to which any Debtor may be liable may be subject to ongoing audits. The Debtors reserve the right to dispute or challenge whether claims owing to various taxing authorities are entitled to priority and the listing of any claim on Schedule E/F does not constitute an admission that such claim is entitled to priority treatment pursuant to section 507 of the Bankruptcy Code. The claims of individual creditors for, among other things, goods, products, services, or taxes are listed as the amounts entered on the Debtors books and records and may not reflect credits, allowances, or other adjustments due from such creditors to any Debtor. The Debtors reserve all of their rights with regard to such credits, allowances, and other adjustments, including the right to assert claims objections and/or setoffs with respect to the same. Pursuant to the Interim Order Granting Motion for Authority to Pay Prepetition Wages and Other Employee Benefit Claims [Docket No. 66] (the Wages Order ), the Bankruptcy Court granted the Debtors authority to pay or honor certain prepetition obligations for wages, salaries, and other compensation, and employee medical and similar benefits. The Debtors have not listed on Schedule E/F any wage or wage-related obligations that the Debtors were granted authority to pay pursuant to any order that has been entered by the Bankruptcy Court, including the Wages Order. The Debtors believe that, with the exception of unpaid employee vacation/pto and deferred compensation, which are included on Schedule E/F part 2, all such claims have been, or will be, satisfied in the ordinary course during their chapter 11 case pursuant to the authority granted in the Wages Order. While the unpaid employee vacation/pto and deferred compensation are currently reflected on Schedule E/F part 2, the analysis of these claims is continuing. Once the analysis is complete, some portion of these claims may be subject to priority treatment. Schedule E/F does not include certain deferred charges, deferred liabilities, accruals, or general reserves. Such amounts are, however, reflected on the Debtors books and records as required in accordance with GAAP. Such accruals are general estimates of liabilities and do not represent specific Claims as of the Petition Date. The Debtors have made every effort to include as contingent, unliquidated, or disputed the Claim of any vendor not included on the Debtors open accounts payable that is associated with an account that has an accrual or receipt not invoiced. 7. Supplemental Schedule F Pursuant to the Order Granting Motion of the Debtors (A) To Authorize Certain Procedures to Maintain the Confidentiality of Patient Information, (B) For Authority to File Under Seal Separate Matrix and Schedule F Containing Patient Information, (C) To Modify Notice to Patients, and (D) For Relief From Required Form of Mailing Matrix with Regard to Separate Matrix [Docket No. 69] (the Patient Confidentiality Order ), Gardere v.6 11

13 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 13 of 40 the Debtors shall file a separate, Supplemental Schedule F that lists known resident claims against the Debtors. The Supplemental Schedule F shall be filed under seal of the Court. Where protected resident information that would otherwise be included in Schedule F of the Debtors Schedules, the Debtors have taken all reasonable precautions to ensure that such information is not disclosed except pursuant to the Patient Confidentiality Order. 8. Schedule G Certain of the instruments reflected on Schedule G may contain renewal options, guarantees of payments, options to purchase, rights of first refusal, rights to lease additional lands, and other miscellaneous rights. Such rights, powers, duties, and obligations are not separately set forth on Schedule G. The Debtors hereby expressly reserve the right to assert that any instrument listed on Schedule G is an executory contract or unexpired lease within the meaning of section 365 of the Bankruptcy Code. In addition, each Debtor reserves all of its rights, claims, and causes of action with respect to claims associated with any contracts and agreements listed on Schedule A/B, including their right to dispute or challenge the characterization or the structure of any transaction, document, or instrument (including any intercompany agreement). Certain confidentiality and non-compete agreements may not be listed on Schedule G. The Debtors reserves all of their rights with respect to such agreements. Certain of the contracts and agreements listed on Schedule G may consist of several parts, including purchase orders, amendments, restatements, waivers, letters and other documents that may not be listed on Schedule G or that may be listed as a single entry. The contracts, agreements, and leases listed on Schedule G may have expired or may have been modified, amended, or supplemented from time to time by various amendments, restatements, waivers, estoppel certificates, letters, memoranda, and other documents, instruments, and agreements that may not be listed therein despite the Debtors use of reasonable efforts to identify such documents. Further, unless otherwise specified on Schedule G, it is the Debtor s intent that each executory contract or unexpired lease listed thereon shall include all exhibits, schedules, riders, modifications, declarations, amendments, supplements, attachments, restatements, or other agreements made directly or indirectly by any agreement, instrument, or other document that in any manner affects such executory contract or unexpired lease, without respect to whether such agreement, instrument, or other document is listed thereon. In some cases, the same supplier or provider appears multiple times on Schedule G. This multiple listing is intended to reflect distinct agreements between the applicable Debtor and such supplier or provider. 8. Statement Part 3, Question 7 Part 3, Question 7 of the Statements requires that the Debtors list legal actions, proceedings, investigations, arbitrations, mediations, and audits by federal or state agencies in which the debtor was involved in any capacity within 1 year before filing Gardere v.6 12

14 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 14 of 40 this case. To the best of their knowledge, the Debtors have disclosed all pending legal actions except for those legal actions or investigations where the Debtor is precluded by court order, if any. That includes litigation filed in which the Debtors have been named as a party to the litigation or appear as a d/b/a in the style or heading of the case. Inclusion of such cases should not be construed as an admission that the applicable Debtor is actually a party to the case, actually does business as the name listed, or should be included in the case as listed. The Debtors reserve all rights in connection with each listed lawsuit, including, but not limited to, the right to dispute or challenge whether they (or any one of them) are/is actually a party in each listed lawsuit. Additionally, other than Preferred Care Inc., as participants in Medicare and Medicaid programs, the Debtors operate skilled-nursing facilities that are highly regulated and subject to investigations and/or audits by state and federal agencies for compliance with Medicare and Medicaid rules and regulations. Certain of the Debtors also operate skillednursing facilities built and financed pursuant to HUD programs that are subject to investigations and/or audits for compliance with applicable regulations. #END OF GLOBAL NOTES Gardere v.6 13

15 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 15 of 40 Debtors Debtor Last Four Digits of Federal Tax I.D. No. Preferred Care Inc Kentucky LP Debtors Bowling Green Health Facilities, L.P Brandenburg Health Facilities, L.P Cadiz Health Facilities, L.P Campbellsville Health Facilities, L.P Elizabethtown Health Facilities, L.P Elsmere Health Facilities, L.P Fordsville Health Facilities, L.P Franklin Health Facilities, L.P Hardinsburg Health Facilities, L.P Henderson Health Facilities, L.P Irvine Health Facilities, L.P Morganfield Health Facilities, L.P Owensboro Health Facilities, L.P Paducah Health Facilities, L.P Pembroke Health Facilities, L.P Richmond Health Facilities - Kenwood, L.P Richmond Health Facilities - Madison, L.P Salyersville Health Facilities, L.P Somerset Health Facilities, L.P Springfield Health Facilities, L.P Gardere v.6 14

16 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 16 of 40 Stanton Health Facilities, L.P New Mexico LP Debtors Artesia Health Facilities, L.P Bloomfield Health Facilities, L.P Clayton Health Facilities, L.P Desert Springs Health Facilities, L.P Espanola Health Facilities, L.P Gallup Health Facilities, L.P Lordsburg Health Facilities, L.P Pinnacle Health Facilities XXXIII, L.P Raton Health Facilities, L.P SF Health Facilities, L.P SF Health Facilities-Casa Real, L.P Silver City Health Facilities, L.P Gardere v.6 15

17 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 17 of 40 Fill in this information to identify the case: Debtor name SF HEALTH FACILITIES - CASA REAL, L.P. United States Bankruptcy Court for the: NORTHERN DISTRICT OF TEXAS Case number (If known): MXM Check if this is an amended filing Official Form 207 Statement of Financial Affairs for Non-Individuals Filing for Bankruptcy 4/16 The debtor must answer every question. If more space is needed, attach a separate sheet to this form. On the top of any additional pages, write the debtor s name and case number (if known). Part 1: Income 1. Gross revenue from business None Identify the beginning and ending dates of the debtor s fiscal year, which may be a calendar year From the beginning of the 1/1/2017 fiscal year to filing date: From to Filing date MM / DD / YYYY For prior year: 1/1/2016 From to 12/31/2016 MM / DD / YYYY MM / DD / YYYY For the year before that: 1/1/2015 From to 12/31/2015 MM / DD / YYYY MM / DD / YYYY Sources of revenue Check all that apply Operating a business Other Operating a business Other Operating a business Other Gross revenue (before deductions and exclusions) 6,632, $ 8,677, $ 9,069, $ 2. Non-business revenue Include revenue regardless of whether that revenue is taxable. Non-business income may include interest, dividends, money collected from lawsuits, and royalties. List each source and the gross revenue for each separately. Do not include revenue listed in line 1. None From the beginning of the fiscal year to filing date: From to Filing date MM / DD / YYYY Description of sources of revenue Gross revenue from each source (before deductions and exclusions) $ For prior year: From to MM / DD / YYYY MM / DD / YYYY $ For the year before that: From to MM / DD / YYYY MM / DD / YYYY $ Statement of Financial Affairs for Non-Individuals Filing for Bankruptcy

18 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 18 of 40 Debtor SF HEALTH FACILITIES - CASA REAL, L.P. Case number (if known) MXM Part 2: List Certain Transfers Made Before Filing for Bankruptcy 3. Certain payments or transfers to creditors within 90 days before filing this case List payments or transfers including expense reimbursements to any creditor, other than regular employee compensation, within 90 days before filing this case unless the aggregate value of all property transferred to that creditor is less than $6,425. (This amount may be adjusted on 4/01/19 and every 3 years after that with respect to cases filed on or after the date of adjustment.) None 3.1. Creditor s name and address Dates Total amount or value Reasons for payment or transfer SEE ATTACHED - SOFA 3 AND SOFA 11 Creditor s name 1,509, $ Check all that apply Secured debt Unsecured loan repayments Suppliers or vendors Services Other 3.2. Creditor s name $ Secured debt Unsecured loan repayments Suppliers or vendors Services Other 4. Payments or other transfers of property made within 1 year before filing this case that benefited any insider List payments or transfers, including expense reimbursements, made within 1 year before filing this case on debts owed to an insider or guaranteed or cosigned by an insider unless the aggregate value of all property transferred to or for the benefit of the insider is less than $6,425. (This amount may be adjusted on 4/01/19 and every 3 years after that with respect to cases filed on or after the date of adjustment.) Do not include any payments listed in line 3. Insiders include officers, directors, and anyone in control of a corporate debtor and their relatives; general partners of a partnership debtor and their relatives; affiliates of the debtor and insiders of such affiliates; and any managing agent of the debtor. 11 U.S.C. 101(31). None 4.1. Insider s name and address Dates Total amount or value Reasons for payment or transfer SEE ATTACHED - SOFA 4 63, $ Insider s name Relationship to debtor 4.2. Insider s name $ Relationship to debtor Statement of Financial Affairs for Non-Individuals Filing for Bankruptcy

19 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 19 of 40 Debtor SF HEALTH FACILITIES - CASA REAL, L.P. Case number (if known) MXM 5. Repossessions, foreclosures, and returns List all property of the debtor that was obtained by a creditor within 1 year before filing this case, including property repossessed by a creditor, sold at a foreclosure sale, transferred by a deed in lieu of foreclosure, or returned to the seller. Do not include property listed in line 6. None Creditor s name and address Description of the property Date Value of property 5.1. Creditor s name $ 5.2. Creditor s name $ 6. Setoffs List any creditor, including a bank or financial institution, that within 90 days before filing this case set off or otherwise took anything from an account of the debtor without permission or refused to make a payment at the debtor s direction from an account of the debtor because the debtor owed a debt. None Creditor s name and address Description of the action creditor took Date action was taken Amount Creditor s name $ Last 4 digits of account number: XXXX Part 3: Legal Actions or Assignments 7. Legal actions, administrative proceedings, court actions, executions, attachments, or governmental audits List the legal actions, proceedings, investigations, arbitrations, mediations, and audits by federal or state agencies in which the debtor was involved in any capacity within 1 year before filing this case. None Case title Nature of case Court or agency s name and address Status of case 7.1. SEE ATTACHED - SOFA 7 Case number Pending On appeal Concluded 7.2. Case title Case number Court or agency s name and address Pending On appeal Concluded Statement of Financial Affairs for Non-Individuals Filing for Bankruptcy

20 Case mxm11 Doc 15 Filed 01/08/18 Entered 01/08/18 18:33:35 Page 20 of 40 Debtor SF HEALTH FACILITIES - CASA REAL, L.P MXM Case number (if known) 8. Assignments and receivership List any property in the hands of an assignee for the benefit of creditors during the 120 days before filing this case and any property in the hands of a receiver, custodian, or other court-appointed officer within 1 year before filing this case. None Custodian s name and address Description of the property Value Custodian s name Case title $ Court name and address Case number Date of order or assignment Part 4: Certain Gifts and Charitable Contributions 9. List all gifts or charitable contributions the debtor gave to a recipient within 2 years before filing this case unless the aggregate value of the gifts to that recipient is less than $1,000 None Recipient s name and address Description of the gifts or contributions Dates given Value 9.1. Recipient s name $ Recipient s relationship to debtor 9.2. Recipient s name $ Recipient s relationship to debtor Part 5: Certain Losses 10. All losses from fire, theft, or other casualty within 1 year before filing this case. None Description of the property lost and how the loss occurred Amount of payments received for the loss If you have received payments to cover the loss, for example, from insurance, government compensation, or tort liability, list the total received. Date of loss Value of property lost List unpaid claims on Official Form 106A/B (Schedule A/B: Assets Real and Personal Property). $ Statement of Financial Affairs for Non-Individuals Filing for Bankruptcy