By Tracy Rucinski and Greg Roumeliotis
(Reuters) - The second-largest U.S. nursing home operator, HCR ManorCare, will file for Chapter 11 protection in the coming days and transfer ownership to its landlord, Quality Care Properties Inc (N:QCP), the latest sign of distress in the senior housing industry.
Quality Care, a real estate investment trust, announced the agreement on Friday, saying it would become the full owner of Toledo, Ohio-based ManorCare's skilled nursing, assisted living, hospice and homecare businesses across the United States.
Shares of Quality Care, which will give up its REIT status, jumped 23.4 percent to $15.55 on the New York Stock Exchange.
HCR ManorCare had owed its landlord more than $300 million in rent, according to regulatory filings. It is one of several large U.S. nursing home chains that have struggled to keep up with rent payments due to changing Medicaid and Medicare reimbursements for nursing homes, rising costs and low occupancy rates.
"This agreement facilitates a consensual resolution that provides stability and flexibility for the business. We see this as the best available opportunity to improve a challenging situation," Quality Care Chief Executive Mark Ordan said.
Reuters first reported the deal, citing sources, earlier on Friday.
ManorCare is owned by private equity firm Carlyle Group (O:CG), which bought the chain in a 2007 leveraged buyout for $6.3 billion. In a move to unlock value, it sold the properties to real estate investment trust HCP Inc (N:HCP) for $6.1 billion in 2010.
HCP spun off the ManorCare properties to Quality Care in 2016 as a sector downturn made it difficult for HCR ManorCare to keep up rent payments agreed under a master lease.
"The lease had very real implications on HCR's health and ability to deal with the headwinds that the industry is facing," Fitch analyst Britton Costa said.
HCR ManorCare's Chapter 11 filing will not impact patient care or the operations of its subsidiaries, which are not filing for bankruptcy, its landlord said in a statement.
Quality Care will put its own management team in place at ManorCare after bankruptcy court approval, which is expected in the second quarter. The companies did not provide any financial details as part of the deal, which is expected to close in the third quarter.
Among other struggling chains, the largest nursing home operator Genesis Healthcare Inc (N:GEN) avoided a bankruptcy filing last week after it reached a restructuring deal with its lender and REIT landlords.