Erickson Retirement Communities, a pioneering senior-living developer founded 26 years ago with the opening of Charlestown in Catonsville, filed for federal bankruptcy-law protection Monday with a plan to restructure more than $1 billion in debt and sell the struggling company to a local investment firm.
Erickson said the Chapter 11 filing was necessary to restructure debt, split the core management and real estate businesses into separate entities, and pave the way for a sale.
Erickson, which has 23,000 residents in communities around the U.S., said it was being purchased for an undisclosed amount by Redwood Capital Investments LLC. That company is controlled by Jim Davis, who is the majority owner of the $5 billion, Hanover-based staffing firm Allegis Group; he could not be reached for comment Monday.
In an interview Monday, Bruce R. "Rick" Grindrod Jr., Erickson's president and chief executive officer, said neither the court filing nor the sale would mean any changes for residents or jeopardize their refundable entrance fee deposits, which can top $400,000.
But some residents, unaware of the financial troubles, were still waiting for more information.
"I don't know what to think because I don't know anything about it," said Jim Greeley, 85, who has lived in Charlestown for eight years.
The company has grown significantly since the founding by John Erickson: It has more than 12,000 workers at the headquarters in Catonsville and its 19 communities in 11 states. In Maryland, Erickson's three communities are Charlestown, Oak Crest in Parkville and Riderwood in Silver Spring.
Erickson's real estate arm, which acquires land for campuses and builds projects, has been hurt by the recession, as seniors who couldn't sell existing homes put off moving to continuing-care communities. In its bankruptcy filing in U.S. Bankruptcy Court in Dallas, the company listed more than $1 billion in liabilities, more than $1 billion in assets and nearly 250 creditors, including The Baltimore Sun.
"We've been in negotiations for quite some time now with all the various lenders and. ... It became clear that in order to execute on the ... sale of the company we were going to need to turn to the courts for supervision," Grindrod said.
The bankruptcy will enable the company to separate Erickson's management business from the real estate development business. "Court supervision will enable us to separate out the volatility and risk of a real estate development company from the stability of a management company," he said.
