Private equity firm buys Haven Healthcare

June 12, 2008 1:37:08 PM PDT
A Georgia-based private equity firm announced Thursday that it is buying Haven Healthcare, the financially troubled operator of more than two dozen nursing homes in New England. Formation Capital LLC of Alpharetta, Ga., said it has signed an agreement to purchase Haven Healthcare of Middletown, Conn. The long-term care provider runs 27 facilities in five states, including 15 in Connecticut.

Haven Healthcare filed for federal bankruptcy protection in November amid investigations by Connecticut officials into whether the company misused millions of dollars in Medicaid funds. The company denied the allegations.

"The acquisition of the Haven Healthcare facilities complements our portfolio of health care companies and our strategy to meet the growing need for skilled nursing services," said Arnold Whitman, chief executive officer and co-chairman of Formation Capital.

A message seeking comment was left with Haven on Thursday.

Genesis HealthCare of Kennett Square, Pa., will manage and operate the facilities on behalf of Formation Capital and Senior Care Development LLC.

Genesis HealthCare runs more than 200 skilled nursing centers and assisted living residences in 13 Eastern states. It also supplies contract rehabilitation therapy to more than 700 health care providers in 20 states and Washington, D.C.

Connecticut Attorney General Richard Blumenthal said the purchase price was $85 million. He said the new management, which is expected to take over Aug. 1, assures continued care for thousands of patients.

Blumenthal, who went to bankruptcy court seeking a restructuring officer for Haven Healthcare, said the sale is a turning point, "ending a regimen of intensive care for this nursing home chain and protecting thousands of patients and jobs."

Court filings indicate that at least $80 million from the sale will be used to pay off debts owed to Haven's secured creditors, but no money will be left over to pay dozens of vendors with unsecured debts, The Hartford Courant reported.

Connecticut officials alleged that Haven Healthcare allowed its nursing homes' bills to go unpaid while Chief Executive Officer Ray Termini used company funds to launch a Nashville record label, Category 5. No criminal charges have been filed.

Termini has acknowledged that he did use some Haven assets to finance the record label, but said none of the money came from Medicaid or Medicare payments. He denied misusing the company's assets, and said no funding was taken from patient care. He said the assets he used were from the refinancing of some Haven properties.

Category 5's top star, country singer Travis Tritt, is suing the label claiming breach of contract and fraud. Tritt, who is seeking $10 million in damages, accuses Termini of misrepresenting Category 5's skill and competence as a record company, its financial resources and its ability to honor its financial obligations.

An audit by Connecticut officials found that Termini used millions of dollars in assets from nursing home businesses for "personal investments," including the record company, a lakefront house in Middlefield and a $1.5 million yacht.

John F. McCormick, audit manager for the state Department of Social Services, said in December that Termini's actions were a major reason for the nursing home chain's financial troubles.

Besides Connecticut, Haven runs health care facilities in Rhode Island, Massachusetts, New Hampshire and Vermont.